Porto Alegre, July 17th, 2023 – The most recent data from the Sugarcane Industry Association (Unica) on cane crushing in the Center-South during the second half of June showed three important aspects. First, hydrated ethanol sales are weak, in line with SAFRAS & Mercado’s expectations. Second, cane crushing has shown very weak growth in the short term, even without the incidence of rain on cane fields in Brazil’s Center-South in June. Third, at the current pace, the current 2023/24 crop will not have the capacity to have average volumes of 600 mln tons, as indicated by the market. At this point there is also an alert from SAFRAS & Mercado since, even under the second upward revision, our estimate grew from only 578 to 585 mln tons, coming from an initial volume of 565 mln tons.
Before going into details, it is interesting to note that in the textual part of Unica’s report there is the important information that cane has lost quality due to the earlier-than-normal crushing by some mills in areas of cane plantations not yet fully ready for harvesting. However, nothing is mentioned in view of the current slow crushing speed due to market estimates that exceed 600 mln tons of cane. In the margin, we have a rise of only 3.8% in cane crushing in the second half of June, coming from a 10% decline in the first half of the month. For sugar, we have a slightly higher growth, in the range of 5% against a fall of almost 12% in the first half of June. Therefore, much of the delay in the first half of last month was not even recovered in the second half of June, given that there was no rain in the period that could disrupt crushing.
On the side of hydrated ethanol sales, we had a final demand in June of 1.29 bln liters, with declines of almost 3% over the year and 8% in the margin (compared to the previous month). SAFRAS & Mercado had forecast for the period sales of 1.22 bln liters, 5.46% below the effective data for the period. Anhydrous ethanol, in turn, also surprised positively with sales of 1.05 bln liters, up 26% YoY and 1.6% in the margin. SAFRAS & Mercado had forecast sales of 1.03 bln liters of anhydrous ethanol in June, down 1.90% from the effective data for the period.
The weather maps for July have shown clear skies and no rain over the Brazilian cane-producing regions of the Center-South and Midwest. As a result, the next two crushing update reports from Unica should bring new increases in sugar production and processed volumes, with the weather favoring this process until the end of July.
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