CS Brazil H1 May sugarcane crush at record high on dry weather: UNICA

25.05.2018

Center-South Brazil crushed 42.65 million mt of sugarcane in the first half of May, up 10.5% year on year, and up 13.2% from H2 April, data from industry association UNICA showed Thursday.

    Sugar mix of 36.58% lowest for H1 May since 2015-16
    Hydrous ethanol output at record high for H1 May
    H1 May hydrous output up 67.6% on year

This marks a record high for H1 May, surpassing 2013-14's (April-March) 40.42 million mt.

The crush exceeded market expectations of 41.1 million mt, according to an S&P Global Platts survey of analysts.

CS Brazil is the world's largest sugarcane and sugar-producing region.

UNICA said the dry weather since the start of the season on April 1 has been speeding up the pace of crushing, but is expected to hit crop yields in the coming months.

The cumulative, April 1-May 15 cane crush was 102.52 million mt, compared to 80.52 million mt in the previous season.

UNICA said 243 mills were operational as of May 15, up from 250 a year earlier.

"In addition, the lack of rain has allowed a recovery in the total recoverable sugar in the first weeks of the crop," UNICA technical director Antonio Rodrigues said in the press release.

Total recoverable sugar (ATR) was 128.26 kg/mt of cane, up 4.3% year on year, and up almost 8% from the previous two-week period. It was also higher than 125.1 kg/mt expected by market participants. This is the highest ATR for the period since the 2007-08 crop.

Of the total cane crushed, 36.58% was used to produce sugar. This is the lowest sugar mix for H1 May since 2015-16's 36.5%.

It is down sharply from the 46.81% a year earlier, but up from 35.78% in H2 April.

"The sugar mix' recovery from the previous two-week period was expected, as mills had to take some profits on higher ATR levels. Still due to the fact that ethanol continued to pay better than sugar, the sugar mix was still expected to be well below last year's," senior analyst for S&P Global Platts Analytics Claudiu Covrig said.

Sugar production in H1 May was 1.91 million mt, down 10% year on year but up 25% from H2 April.

Cumulative sugar production over April 1-May 15 was 4.15 million mt, up 4.9% from the previous season.

"If there had not been a change in the sugarcane mix, the accumulated sugar output would have already exceeded 5 million mt. The reduction to 40.46 kg/mt in the current season from 49.12 kg/mt of sugar in the 2017-18 crop has already translated into a reduction of 1 million mt in sugar output," Rodrigues said.

With more of the cane destined for ethanol production, producers are particularly focused on hydrous ethanol, given its greater profitability and strong consumption at the pumps.

Hydrous output in H1 May was 1.41 billion liters, a record high for the period. This is up 67.6% on the year and 10.5% higher than the previous two-week period.

Until now, the only time hydrous output was higher was at the peak of the 2010-11 crop, in H2 August, UNICA said.

Cumulative (April 1-May 15) hydrous ethanol production is now 81.2% higher year on year at almost 3.6 billion liters.

Anhydrous production in H1 May increased 2.23% year on year at 657.3 million liters and is up 55% from H2 April. Cumulative anhydrous output is up 6% at 1.136 billion liters.

HYDROUS ETHANOL PRICE AT RECORD HIGH

Cumulative ethanol sales in the first half of May totaled 1.13 billion liters, up 17% from the same period of 2017.

The highlight was hydrous ethanol sales to the domestic market, with 759.75 million liters sold in the first 15 days of May, up 34.7% year on year.

This is the 13th consecutive two-week period that hydrous sales in surpassed those a year earlier.

The strong demand is down to the increased competitiveness of hydrous against gasoline at the pumps.

According to UNICA, hydrous is now more competitive than gasoline in five states -- Sao Paulo, Parana, Minas Gerais, Mato Grosso and Goias -- which together account for 55% of the national fleet of light vehicles.

The latest data from National Petroleum Agency (ANP) for the week ending May 19 still shows hydrous parity against gasoline becoming more competitive in the Southeast region -- the largest consuming region of the country -- at 63.20% down from 63.97% a week earlier and the lowest since September 2015.

Hydrous ethanol is mostly used as fuel in flex-fuel vehicles and competes with gasoline at the pump. Anhydrous is blended with gasoline at a 27% ratio under a national mandate. Both products are also used in industry.

Hydrous prices are now at a record high for any May with the S&P Global Platts assessment of hydrous ex-mill Ribeirao Preto reaching Real 2,050/cu m ($563/cu m) earlier this week.

Prices have recently recovered supported by strong consumption because of high domestic gasoline prices as benchmark crude futures have risen to their highest since 2014 on geopolitical concerns.


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