Porto Alegre, April 25th, 2022 – Data from Unica’s most recent report on the second half of March bring much more than the end of the 2022/23 crop in the Center-South, as they also show an important recovery in domestic demand for both anhydrous and hydrated ethanol. In addition, there is a very important confirmation of SAFRAS & Mercado’s estimate of the final volume of the crop. In May last year, SAFRAS & Mercado already estimated the final cane crush volumes for the 2022/23 season at 543 mln tons of cane. This volume was reached during the second half of February, when mills effectively closed their activities, indicating a final volume in line with SAFRAS & Mercado’s indications.
The detail is that in March, 36 mills were starting the new 2023/24 crop sooner than normal, which ended up raising the crush for the month of March to 4.99 mln tons. Like the mills that were still within the 2022/23 crop calendar, these almost 5 mln tons ended up being accounted for this season, raising the final volumes to 548 mln tons. If not for this methodological detail, the final volumes would be clearly in line with the official estimate by SAFRAS & Mercado. Returning to Unica’s data, we can highlight ethanol sales, which positively surprised the market. The expectation of SAFRAS & Mercado, at the end of March, was pointing to 878 mln liters of anhydrous and 1.04 bln liters of hydrated ethanol.
Despite this, the consolidated data for the month brought volumes of 924 mln liters for anhydrous and 1.15 bln liters for hydrated ethanol. For anhydrous ethanol, volumes were 5% above the estimates by SAFRAS & Mercado, and for hydrated ethanol, volumes were 10% above expectations. The resumption of hydrated ethanol sales is due to the high level of discounts on physical market prices that mills presented to distributors in March with to make quick sales, especially of ethanol from the previous season. Thus, a market of opportunity sales was created for distributors that sought to build hydrated ethanol stocks formed at lower prices, without the necessary counterpart of demand at the pumps.
This explains the increase in anhydrous sales, which evolved above SAFRAS & Mercado’s expectations and also grew in the margin. In fact, there was also an increase in the presence of distributors in mills in March due to the formation of supply contracts between both parties, which helped to heat up the anhydrous market. In the textual part of Unica’s report, there are no major highlights, but one of them refers to the indication that cane productivity has increased due to the rains of the last off-season.
In general, the Unica report was an end-of-harvest report but with an indication of a strong volume of cane crushed earlier than normal by a large number of mills, which ended up “contaminating” the final volumes of the season by 5 mln tons of cane, which is not little and is far from being a marginal deviation from SAFRAS & Mercado’s projections. The alert is also valid for indications of strong sales of hydrated ethanol to distributors without actually indicating the heating of the final sales at filling stations.
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