Porto Alegre, August 25th, 2025 –The latest Unica’s report on cane crushing data from the Center-South region for the second half of July confirmed three factors anticipated by SAFRAS & Mercado in early August. The first is the achievement of current cane crushing standards for the peak production of the season. In early August, we forecast that the data for the first half of July, which had been observed until then, indicated the crop’s production peak fifteen days earlier, as this pattern usually occurs between the second half of July and the first one of August.
As a result, the data on the second half of July did not show significant growth compared to the first half of the same month, demonstrating that the crop no longer has the production capacity to keep advancing. In this sense, SAFRAS & Mercado warns that the entity’s next report will very likely show lower cane crushing and derivative production volumes in the biweekly evolution than those currently seen in the second half of July.
Two other points predicted by SAFRAS & Mercado that were confirmed in the current report concern sales of anhydrous and hydrated ethanol from mills to distributors. Earlier in the month, SAFRAS & Mercado had forecasted that sales at the end of July should have been 1.06 bln liters for anhydrous ethanol and 1.70 bln liters for hydrated ethanol. The most recent report indicated a volume of 1.06 bln liters of anhydrous ethanol and 1.75 bln liters of hydrated ethanol. As a result, hydrated ethanol saw a 2.5% increase in its July sales margin, while anhydrous ethanol saw an 8% growth. Year-over-year, anhydrous ethanol rose 6%, while hydrated ethanol dropped nearly 3%. SAFRAS & Mercado’s hydrated ethanol data showed a 2.87% decline in effective volumes for the month, while our data for anhydrous ethanol fell 0.13%.
Another important point in UNICA’s report was a rare analysis of the progress of the current 2025/26 crop in the region, which, in the entity’s view, has seen a sharp decline in cane quality (in addition, of course, to the obvious decline in quantity) due to unfavorable rainfall at various stages of the crop, which has significantly impacted quality. Furthermore, the entity points out that quality and quantity standards usually tend to be inversely proportional in each season, but, in the current one, they have remained directly proportional from a negative perspective, which is unusual.
Overall, the 50 mln tons of cane crushed in the second half of July raised the crop’s total to 306 mln tons, still 8% lower, although there was a 1% increase in the margin. The same can be said for sugar, which produced 3.6 mln tons in the second half of July, bringing the crop’s total to 19.2 mln tons, still maintaining a 7% decline YoY, even though there was a 6% increase in the margin (compared to the preceding fortnight).
SAFRAS & Mercado also highlights the atypical tone that the production mix has assumed over the crop, with higher concentrations of sugar than ethanol, while the usual pattern is the opposite. This is due to the high level of commitment to sugar export deliveries that mills have for this entire year, based on hedging made during the previous year, when international prices were significantly more favorable.
However, as the current 2025/26 crop has seen a 10% decline in quantity and a nearly 5% decline in quality, on both annual and 5-year averages, mills are strongly inclined to divert the cane needed to maintain the sugar volumes to be exported over the year from ethanol. The increase in the anhydrous/gasoline blend further aggravates this situation and puts more negative pressure on the supply of hydrated ethanol in the production mix, which will reinforce the upward support for its prices in the physical market going forward.
Since the second half of June, the sugar mix has been gaining a 6-to-7% distance from ethanol, which is not negligible. In the data on the second half of July, this gap has increased, with the average pattern of sugar rising from 53% to 54%, while ethanol’s average pattern fell from 46% to 45%.
