Porto Alegre, July 24th, 2024 – The most recent data from Unica on cane crushing in the Center-South region for the first half of July showed (albeit belatedly) the effects of the drought that has been affecting the region since the previous off-season (with rainfall between 13% and 27% below average in the region), which has been followed by a regular period of cane crushing with practically no rainfall between April and July (except for only the second week of July). In addition, SAFRAS & Mercado warns that the current drought is expected to last at least until the end of August, with forecasts of more intense rainfall only expected for the end of September.
Based on this, SAFRAS & Mercado warns that Unica’s next biweekly reports are expected to show even greater volumes of losses in cane productivity and quality due to the effects of this prolonged drought. It is in this context that the crushing data for the first half of July, at 43.17 mln liters, showed a decline of 11% in the margin (compared to the immediately preceding fortnight) and also a decline of 11% year over year, compared to the same fortnight in 2023. Although the accumulated volume remains high compared to what was seen up to this point last season, this advantage fell sharply from the second half of June to the first one of July, going from +13% to +8%.
The same can be said about sugar, which, with its production of 2.93 mln tons in the first half of July, was 9% lower than the immediately preceding fortnight and also 9% lower than at the same point last season. Like in the case of cane, the accumulated annual advantage fell from +15% to +10% between the data for the second half of June and the most recent data for the first half of July. In the textual part of the report, Unica reported the impacts of “light rains” affecting cane fields in some locations. Furthermore, the entity pointed out important information regarding the effects of drought on cane, related to changes in the physiological dynamics of fields. However, nothing is said about the cumulative effects of drought together with the incidence of three polar air masses over part of growing regions, which should have had an even more negative impact on cane fields in the Center-South in the second half of the year, both in terms of quality and quantity. However, SAFRAS & Mercado warns that these effects reinforce the negative outlook for the remainder of the second half of the year and the final half of the crop.
On the one hand, the production mix remained practically unchanged in the balance seen since the first half of July, going from 50.11% to 50.12% of cane used for ethanol production by mills between the second half of June and the first one of June, while sugar changed from 49.89% to 49.88% in the same period. So it was not due to this factor that prices were volatile. However, SAFRAS & Mercado warns about the levels of increase in TRS per ton of cane, which have shown significant growth patterns between the first half of June and the first one of June, rising from 134 to 143 kg/ton.
This increase may in theory show positive signs about cane quality but in reality only shows levels of concentration in each mill due to the drought, which actually results in a smaller quantity of cane suitable for harvesting, even though it is more concentrated. However, since this concentration has occurred more due to the drought than better biological plant development, it is not a positive factor for the market.