Porto Alegre, July 22nd, 2025 –Data from Unica’s most recent report with information on crushing in the Center-South region for the second half of June were surprising, on the one hand, and in line with expectations on the other. Within expectations, harvest volumes and derivatives production continued to show sharp declines year over year and moderate gains in short-term performance, when considering margins and comparing the current fortnight to the previous one.
However, the negative surprise came from the sharp decline in anhydrous and hydrated ethanol sales from May to June. Looking at the figures, we see that demand for 1.70 bln liters of hydrated ethanol and 981 mln liters of anhydrous ethanol in June showed margin declines of 6% for hydrated ethanol and 8% for anhydrous ethanol, although the latter managed to grow only 0.32% year over year. Hydrated ethanol, however, dropped 3% year over year.
The previous month, SAFRAS & Mercado had already warned about the sharp decline in hydrated ethanol sales, pointing to an expected June demand of exactly 1.70 bln liters, in line with the effective figures for the month. SAFRA & Mercado forecast anhydrous ethanol production of 1.08 bln liters, with actual sales data for June showing a 9% decline in comparison to SAFRAS & Mercado’s expectations for the period.
In this context, we can say that weak sales of both anhydrous and hydrated ethanol in June negatively surprised the market, falling well short of expectations, even though SAFRAS & Mercado had already detected weak hydrated ethanol sales. In SAFRAS & Mercado’s view, demand has been poor from distributors not because sales at the pump have declined, but rather because the current 2025/26 crop in the Center-South region of Brazil is approaching its production peak, which occurs between the second half of July and the first half of August.
Aware of this seasonal nature, distributors have been reducing and slowing down their purchases from mills as much as possible since June, even in the case of anhydrous ethanol, which explains why June sales volumes were so weak. Another point is that distributors have been postponing their purchases to obtain lower prices during the peak production period, which is currently underway, amid a scenario of significant short-term supply surpluses.
However, SAFRAS & Mercado warns that this opportunity window will be very short for distributors. This is because the current 2025/26 season was already marked by a decline in the quality and quantity of cane to be processed due to the problems observed the previous year (drought + fires + limited supply of new seedlings for renewing and replacing cane fields), and the frosts in the fourth week of June only exacerbated this situation.
It is in this context that production data did not surprise the market, showing moderate gains in the short term while maintaining losses year over year. The 42 mln tons of sugarcane crushed in the second half of June indicated a 10% increase in the margin, but a 12% decrease for the year. The same is true for sugar production, which, at 2.8 mln tons in the second half of June, showed a 16% increase in the margin but a 12% decline for the year.
Cumulatively over the crop, cane supply reached 206 mln tons, down 13%, while sugar production reached 12 mln tons, down 13%. All in line with market expectations. It was no surprise that raw sugar prices in New York even sharpened their lows in the trading session of Monday the 14th, following the data from the Center-South region, whose losses grew from 0.9% to 1.6% at the end of the session, indicating that international players were more focused on the fact that the current 2025/26 season was improving in the short term than on its continued deficit in the medium term.
