Porto Alegre, August 23th 2022 – Unica’s latest report, late in the morning of August 10, brought many important pieces of information to the market. The lack of fundamental information was quickly put aside with the new data on the region. Basically, cane supply and sugar production keep growing, with the second half of July being marked by the production peak of the current 2022/23 crop in Brazil’s Center-South. Even so, as the season started with a relative delay, the first half of August may be marked by new production growth. With this, the market expected a large-scale change in the vector in the accumulated comparison of the season, which should change from negative to positive, with a strong advance expected in weekly numbers. But that is not what happened. This is because, in the annual comparison, the accumulated cane crush still shows a deficit of 7% while sugar production is almost 13% lower than in the previous year.
In terms of volume, current sugar accumulates 15.97 million tons against 18.35 million tons in the past harvest and processed cane accumulates 282 million tons against 305 million tons in the previous season. These data managed to raise the October/22 contract in New York by more than 1.6% in the afternoon of August 10. Nevertheless, SAFRAS & Mercado warns that this asset remains fully bearish and that recent gains are far from breaking the resistance of this trend. Therefore, profit-taking in the coming days can be seen even more when looking at the biweekly production data. They show that the cane crush advanced 5.8% in the margin and 4.3% year over year, while sugar production grew 10% in the margin and 8.5% YoY. This may lead the foreign market to see that, even with a deficit in accumulated volumes, supply continues to grow during the fortnight.
With this, no matter how big the daily gains are, they should not have the strength to break the resistance of the ongoing downtrend, which is strong for the medium term. For hydrated ethanol, the surprise is positive, with a volume of 1.38 billion liters, with 937 million liters of anhydrous ethanol sold in the domestic market. Still in July, SAFRAS & Mercado had already anticipated sales of 925 million liters of anhydrous ethanol for this month and 1.37 billion liters of hydrated ethanol. Despite this, the very weak competitiveness of hydrated ethanol against gasoline continues to be an obstacle to the increase in the sales of the former. Furthermore, this increase in domestic sales causes the ethanol production share to increase from 52.9% to 57.4%, while that of sugar drops from 47% to 42% between the beginning and the end of July.
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