Dry weather boosts CS Brazil H1 May sugarcane crush to record high: Platts survey

24.05.2018

The amount of sugarcane crushed in the first half of May in Brazil's Center-South region is expected to have reached 41.1 million mt, up 6.6% on the year and up 9% from the previous two-week period according to an S&P Global Platts survey of analysts Wednesday.

The volume would be a new record high for the H1 May period, surpassing the 40.42 million mt reached in the 2013-14 season.

Analysts attributed the expected increase to lower average rainfall for the region compared with historical levels that boosted the pace of the crushing activities.

The 2018-19 sugarcane season officially started April 1 in the Center-South, the world's largest sugarcane and sugar-producing region.

Industry association UNICA is expected to release its official production figures for the region on Thursday at 11 am Brasilia time.

In terms of the sucrose content, high levels are expected due to the drier weather. The consensus estimate for the cane's total recoverable sugar (ATR) in H1 May was 125.1 kg/mt, with individual forecasts ranging from 125.2-126.9 kg/mt. That would be up 2.12 kg/mt on the year and 6.5 kg/mt higher than in H2 April. This would be the highest ATR for the period since the 2010-11 crop.

"Due to dry weather the ATR is expected to witness a jump when compared to the previous fortnight and to be higher on the year. Last year 1.2 days were lost to rain while this year there was none. Moreover, last year the soil was more humid as also on H2 April 2017 it rained a lot with 4.9 days lost to rain compared to less than 0.3-0.4 days this year," said Claudiu Covrig, senior analyst for S&P Global Platts Analytics.

The proportion of cane directed to sugar production in the Center-South region in H1 May was expected at 37.7%, according to the survey, down from 46.81% a year ago but up from 35.78% in H2 April.

It would be the lowest mix toward sugar for H1 May since 2015-16, when it reached 36.5%.

"The sugar mix is expected to see a recovery from the previous two week period 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 is still expected to be well below last year's," Covrig added.

With that, sugar production is expected to reach 1.85 million mt, down 12.7% from a year ago, but a recovery of 21% from H2 April.

With more of the sugarcane destined towards ethanol production compared to last year, the amount of hydrous output for H1 May is expected to reach a record high for the period at 1.26 billion liters. This would be up 50.7% from a year ago and 10.9% higher than the previous two-week period.

If the analysts' expectations were to be met, the cumulative (April 1-May 15) hydrous ethanol production would be 74% higher compared with a year ago at almost 3.4 billion liters.

Despite the surge in production rates, hydrous prices are now at a record high for any May with the Platts assessment of hydrous ex-mill Ribeirao Preto reaching Real 2,050/cu m on Tuesday.

Prices have recently recovered supported by strong consumption rates amid high domestic gasoline prices and international geopolitical concerns about oil availability that took oil prices to their highest levels since 2014.


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