Porto Alegre, August 15th, 2022 – Expectations of new lows in anhydrous and hydrated ethanol in August along with practically stable prices for crystal sugar must raise premiums from 23.10% to 33.04% in July in the short term, with new gains of 45% in the last quarter of the year. The month of July was marked by the strong strengthening of the premiums of crystal sugar with up to Icumsa 150 over the average price of anhydrous and hydrated ethanol, both converted into reals per 50-kilogram bag. Between June and July, the advantage of crystal sugar went up from 12.13% to 23.10%, this being the third highest level of the year, losing only to January and February, when premiums oscillated respectively between 24.92% and 44.09%. This strengthening stemmed from the difference in the behavior between the average prices in the physical market for ethanol and crystal sugar. While the former fell, the latter advanced, albeit very subtly, but enough to almost double the premiums of sugar, even though it had a very weak short-term rise in its monthly average.
Between June and July in the physical market, the average of hydrated ethanol dropped 10% while that of anhydrous dropped a further 7.7%, down to an average decline of 8.86%. At the same time, crystal sugar in the physical market advanced only 0.04%, remaining practically stable. However, given the strong lows which both anhydrous and (mainly) hydrated ethanol coped with, that was enough to raise sugar premiums from 12% to 23%. For August, the situation must increase even more in favor of crystal sugar, as SAFRAS & Mercado expects it to have premiums of 33.04%. This must occur in the face of prospects of new sugar gains and new ethanol losses.
SAFRAS & Mercado forecasts a 2.15% rise in average crystal sugar prices in the physical market, which must go from BRL 128 to 131 per bag. On the other side, hydrated ethanol must fall by 7.51% in August, from BRL 3.33 to 3.08 per liter. In turn, anhydrous ethanol must have a milder decline, but still important, of 3.46%, with its monthly averages going from BRL 3.47 in July to BRL 3.35 in August. In addition, the expectation is that, with the new downward adjustments for gasoline expected in August, the hydrated ethanol price will fall even further, reaching BRL 3.00, while crystal sugar must appreciate more intensely, given the high inclination of mills to produce VHP for the next three months (i.e. from now until the end of the current 2022/23 crop in the Center-South, which must end in October), to produce and ship the sales made between June and July. Therefore, premiums for crystal sugar against hydrated ethanol are expected to increase to levels of 40% to 45% during the fourth and final quarter of 2022.
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