The most recent data from Unica regarding crushing in the second half of November showed a strong recovery in the cane crushing process in the region where the volume processed increased by 23.76% in the margin, with a growth of just over 3.90 mln tons in the same period. From the first to the second half of November, the processed volume increased from 16.44 to 20.35 mln tons.
The reason for the increase in crushing was the effects of the rains seen on the cane fields in the Center-South since the beginning of the second week of October, already widely discussed by SAFRAS & Mercado in its reports at the time. However, the practical results of the recovery of cane fields could only be seen in the second half of November, practically a month after the beginning of the rainy season in the Center-South, a month in advance.
Back in our daily reports and special consulting reports at the time, we commented that the cane fields in the Center-South were already showing visible signs of improvement in their conditions with the rains up to that point, with impacts now being felt in the data for the second half of November. Furthermore, sugar prices in New York even erased the gains of nearly 1% that had accumulated early in the morning, before the publication of the Unica report that showed a 23% increase in cane volume and a 20% increase in sugar production.
This context of maintenance of cane crushing activity by several mills that canceled the early end of crushing ended up being widely discussed in the textual part of the entity’s report, a fact that has also been anticipated by SAFRAS & Mercado since the beginning of the rains in the second week of October. Regarding sales of hydrated ethanol from mills to distributors, SAFRAS & Mercado was also assertive. Last month, we estimated total demand from distributors of 1.77 bln liters of hydrated ethanol for November, a volume that was only 0.60% lower than the effective data for the period, which indicated sales of 1.78 bln liters.
On the anhydrous ethanol side, SAFRAS & Mercado reported total demand from distributors at mills of 981 mln liters, a volume that was 1.35% lower than effective sales in November, which were 994 mln liters. In addition, it is important to highlight the slowdown in anhydrous ethanol sales in the short and medium term, with a 10% decline in the year and an 8% decline in the margin, compared to the previous month, which reflects a slowdown in gasoline sales and a movement in the opposite direction in hydrated ethanol sales.
Despite this, it is interesting to note that hydrated sales showed a 1.78% decline in the margin, compared to October demand, but with a 3.9% increase year-over-year, which indicates that there is also weakness in short-term demand resulting from the high level of storage at mills, which, in the distributors’ view, represents an opportunity for a decline in prices over the next two weeks. Mills are expected to have a greater need to sell these stocks starting from December. Therefore, according to SAFRAS & Mercado, the decline in sales in the second half of November is simply a shift in demand from distributors to December rather than a structural slowdown in demand for hydrated ethanol.
