Porto Alegre, July 3th, 2023 – In the margin, cane crushing decreased 11.39%, sugar 11.92%, anhydrous ethanol 5.28%, and hydrated ethanol 11.53%; TRS level increases as cane spends more time planted; Ethanol sales did not advance as much as expected in the first fortnight.
Unica’s data for the first half of June confirmed the expectations of SAFRAS & Mercado reported since the end of May, when we anticipated that the rains in the first half of June would bring not only deceleration in the margin (compared to the immediately previous fortnight) from the crushing volumes and production of derivatives, but also declines. The weather was moist not only in the first half of June but also in a large part of the second half of this month, which must slightly boost the crushing in the margin compared to the data to be released by Unica for the second half of the month.
Textually, Unica’s report usually tries to focus on the annual comparison, where we still have positive levels of comparison, even in the face of declines in the margin. This happens because last season’s recovery was very slow compared to the epic losses of the previous year. As the current crop has a strong recovery tone, even with retreats of more than 10% in the margin, the volumes of crushed cane still manage to be higher than last year’s, which also reinforces the recovery tone of the current crop. Another detail pointed out in Unica’s text refers to the 26% increase in cane productivity, as a result of rains, which, on the one hand, delay crushing but, on the other, improve its quality.
However, Unica warns that much of the increase in productivity is related to first-cut cane and that these high levels are not likely to be sustained in the next few weeks. Apart from this passage, another important highlight of the report comes from the reduction in the potential demand for anhydrous and hydrated ethanol for the month of June as a whole, based on sales now in the first half of the month. Hydrated ethanol, with a volume of 614 mln liters, may have a total demand in June of 1.22 bln liters, below the level of 1.41 bln in the previous month. The same can be said about anhydrous ethanol, which, with sales of 516 mln liters in the first half of the month, may have a total demand in June of 1.03 bln liters, below 1.04 bln liters in May.
These weak data from the first half of June contrast sharply with the behavior of competitiveness of hydrated ethanol, which precisely this June managed to reach levels of competitiveness in SP. Besides expanding the number of states, we now have the largest consumer state in the country with valid levels of advantage for hydrated ethanol, which has not been seen since April last year. In addition, June is a month with only 30 days, which reduces the statistical sampling of consumption for hydrated ethanol. However, what draws the most attention is this discrepancy in low consumption figures at a time when competitiveness is increasing both in quantitative and qualitative terms. Besides SP showing such valid levels, we have GO and MG with neutral levels, around 70%, which also helps to generate spontaneous demand for hydrated ethanol.
Based on this, despite the weak data for the first half of June, SAFRAS & Mercado expects a much more intense recovery in hydrated ethanol sales in the second half of the month to the point of offsetting the weak data from the beginning of the period. Another important detail is that SAFRAS & Mercado raised its cane crushing expectations for the current 2023/24 season for the second time, now from 578 to 585 mln tons of cane, both due to the rains in June and the rains that are forecast for August and September this year, as shown by Inmet’s monthly maps for the next three months, which must continue to reinforce the intense advances in the annual comparison and in the margin from now on.
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