CS Brazil H2 July sugarcane crush seen at record 50.69 million mt: Platts survey


The amount of sugarcane crushed in Brazil's key Center-South region in the second half of July is expected to total 50.69 million mt, up 2.6% on the year, an S&P Global Platts survey of analysts showed Wednesday.

The volume, up 6% from two weeks prior, would be a record high. The previous record was 49.67 million mt crushed in H2 July, 2015.

The 2017/18 sugarcane season started April 1 in the Center-South, the world's largest sugarcane and sugar producing region, and is currently reaching its peak.

Industry association UNICA is expected to release its official production figures for the region on Thursday.

Favorable weather over H2 July continued to benefit the pace of sugarcane harvesting. According to analysts' estimates, an average of only 0.18 days of stoppages were recorded due to rains and maintenance in H2 July, compared with roughly 0.29 days of rains in the first half of the month.

Ethanol production in Brazil's key Center-South region in the second half of July is expected at 2.06 billion liters, down 0.5% on the year but up 10% from the first half of July, an S&P Global Platts survey of analysts showed Wednesday.

To produce ethanol, mills used 49.62% of the 50.69 million mt of the cane crushed in H2 July, the survey showed. That compared with 51.95% of the 49.43 million mt of cane crushed over the same period last year.

A recent increase in ethanol prices following rising PIS/Cofins taxes has narrowed the spread between hydrous ethanol and New York sugar over the course of July, and might prompt some adjustments in the mix.

Over July 1-20, sugar paid on average 125 points over hydrous, but over July 21-31, sugar paid just 48 points over, said Alessandra Rosete agricultural analyst at Kingsman, an analytical unit of S&P Global Platts.

In June, sugar paid 68 points more than hydrous, while in July last year, sugar paid on average 543 points more than hydrous, added Rosete.

Hydrous is expected to have accounted for 55%, or 1.126 billion liters, down 2.5% on year, while the balance was anhydrous, or 933.7 million liters, up 2% year-on-year.

Although the price of hydrous ethanol increased in relation to gasoline after the tax rise, it is expected to decline in the short term due to the reduction in PIS/Cofins for distributors on July 28, if mills do not absorb all the gap left by that tax drop, says Rosete.

Hydrous demand in Q3 is expected to reach roughly 3.6 billion liters, while in Q4 demand should drop to roughly 3.06 billion liters as the season heads to its end and prices tend to increase, she added.

The balance of the cane, or 50.38%, was expected to have been used to produce 3.39 million mt of sugar, up 9% on the year and from H1 July.

Wider analysts' expectations for the cane crush ranged from 49.8 million mt to 51.6 million mt. The consensus for cane's total recoverable sugar, or ATR, was 139.4 kg/mt in H2 July, with a wider range of 137.3-141 kg/mt. That compared with 137.71 kg/mt a year ago and 135.07 kg/mt in H1 July.

Considering the average poll results for crushing, the accumulated volume in the first four months of the season (April-July) is expected to have reached 297.28 million mt, down 5% on the year, the survey showed.

Even though the cumulative cane crush was down on the year, cumulative sugar production was expected to be 3% higher than the same period last year at 17.54 million mt. That is a result of a higher proportion of the cane crushed directed to sugar production this season.

In Parana, the fifth largest state producer in Center-South, the amount of sugarcane crushed in H2 July was 3.52 million mt, up 9.7% from a year ago and up 4.7% from two weeks earlier, data from industry association Alcopar showed.

Drier weather in the second half of July continued to favor harvesting and resulted in the highest crush total for a two-week period since the first half of August 2015, when the state crushed 3.69 million mt, data show.

The percentage of the sugarcane crushed that was directed to produce ethanol was 37.84%, compared with 42.57% in the same period last year and 38.4% in H1 July.

Ethanol production totaled 109.68 million liters in the reporting period, up 0.7% year-on-year and up 5.4% from the first half of the month.

Of that total, hydrous ethanol accounted for 50 million liters, while the balance was anhydrous ethanol.

The balance of the sugarcane -- 62.16% -- was used to produce 298,420 mt of sugar, up 23% year-on-year and up 7.9% from the first half of July.

Producers have directed more sugarcane towards sugar production at the expense of ethanol output as sugar in both the domestic and export markets has paid out better than ethanol.

The dry weather also boosted the ATR in H2 July, reaching 142.57 kg/mt of sugarcane, up 3.6% from the year-ago period and up 2% from the first half of the month.

Ethanol sales (hydrous plus anhydrous) in the domestic market are expected to have reached 2 billion liters in July, slightly up from 1.97 billion liters in June.

Hydrous is most used in flex-fuel vehicles, while anhydrous is blended with gasoline at a 27% rate, according to a national mandate. Both products are also used in industry.


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