Porto Alegre, June 25h, 2024 – Data from Unica’s most recent report on cane crushing in the second half of May brought an important indication of short-term stability. Production volumes in the second half of May in comparison to the first half of the month showed a very weak increase, bordering on stability, of 0.59%. This pattern of very low growth is unusual for this time of year when the volume of cane crushing is theoretically heading toward the peak of the season, which occurs between the first and second half of July.
Unica reported, in its analytical part of the report, that the rains that occurred in producing regions further north in SP were the reason for this low level of growth in cane crushing. Even so, in the medium term, accumulated volumes show important gains of just over 11%, which denotes that the crop as a whole still presents some strength in terms of volume.
However, SAFRAS & Mercado warns that besides the short-term stability in crushing volume compared to the previous fortnight, there is also an important decline of 3.3% in the annual comparison in cane crushing in the second half of May compared to the same moment of the previous year. It is exactly this combination of factors (very weak highs in the short term along with lows in the medium term) that has kept the October/24 prices within their current upward trend, which has been sustained despite short-term adjustments, however large they may be, as was the case with the decline of more than 2% on Monday, the 17th, on the New York Stock Exchange.
SAFRAS & Mercado also warns about the quality standard of cane in the second half of the year. Even though the report on the second half of May pointed to an increase of 4.12% in the TRS level from the first to the second half of the month (going from 124.71 to 129.85 kg/ton), the standard of low volume of rain that has hit the cane fields in Brazil’s Center-South (from the beginning of the second half of April to the beginning of the third week of June) is expected to cause declines in the level of cane quality in the second half of the year.
The accumulated rainfall maps for cane-producing regions of the Center-South, updated by Inmet, show that the months of June, July and August should have rainfall patterns well below the historical average for the period, which should result in a decline in the level of cane quality when we remember that this pattern of light rains has occurred since the beginning of the second half of April.
Looking at ethanol sales, we see that the demand of 1.87 bln liters for hydrated ethanol in May was 1% higher than the demand of 1.85 bln liters seen in April, as well as above the demand predicted by SAFRAS & Mercado for the period, which was also around 1.85 bln liters. With the new sales pattern already at the level of 1.87 bln liters in May, SAFRAS & Mercado estimates that such consumption level of hydrated ethanol will be maintained in June. In SP, the competitiveness ratio between hydrated ethanol and gasoline has remained firm at 64% for four consecutive weeks.
This underpins SAFRAS & Mercado’s expectations regarding sales in June, even though hydrated ethanol prices have shown rising levels in the first half of the month, due to similar gains also seen in gasoline, resulting in the maintenance of these competitiveness standards.
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