Porto Alegre, August 30, 2021 – Besides the decline in crystal sugar from June to July, hydrated and anhydrous ethanol movements were also positive, albeit also bordering stability in the short term. The month of July was marked by a moderate reduction in the level of advantage of crystal sugar with up to Icumsa 150 over the average of anhydrous and hydrated ethanol in the Brazilian physical market. In general, the period was marked by a small range of oscillation in the advantage of sugar over ethanol, going from 7.32% to 6.72% from June to July. With this, July is characterized as the third consecutive month in which the new pattern of advantage is observed in the price ratio between these products. From November 2020 to January this year, the crystal sugar advantage ratio ranged from 35% to 42%.
After that, between February and April 2021, the price ratio remained positive for sugar, but on a smaller scale, from 11% to 17%. Finally, more recently, between May and July this year, an even smaller scale of advantage of crystal sugar over ethanol has been observed, between 5% and 7%. Apparently, SAFRAS & Mercado expects this scenario to continue in August, given the advantage level of 6.77% over crystal sugar.
Besides remaining within the most recent observation range, the maintenance of the arbitration from July to August occurs due to the increase in the expected prices of anhydrous and hydrated ethanol, from BRL 3.55 to 3.61 (+1.69%), at the same time that crystal sugar must also appreciate in the same intensity, going from BRL 116.06 to 118.00 (+1.67%).
In this context, in July, the trading average of anhydrous ethanol fluctuated by BRL 3.54 per liter, while hydrous ethanol fluctuated by BRL 3.55 per liter, both in the Ribeirão Preto region. These values converted into 50-kilogram bags were respectively equivalent to BRL 106.23 and 111.27, which result in the average of BRL 108.75, which serves as a comparison with sugar. In the same period and the same region, the 50-kilogram bag of crystal sugar with up to Icumsa 150 fluctuated by BRL 116.06 against BRL 116.33 in the previous month. As a result, the price advantage of white sugar over ethanol (average prices of anhydrous and hydrated ethanol traded in the same period and region) traded in the domestic market was 6.72% in July.
The sugar advantage over the biofuel ended up retreating by 17.82% from 24.53% in the same period of the previous year. Nevertheless, when compared to the previous month, we can see a reduction of 0.60% in the advantage of sugar over ethanol when the commodity remunerated 7.32% more than the biofuel. Compared to the average of the crop, the data for July were 2.06% lower, with the average for the 2021/22 crop being 8.77%.
The expectation of SAFRAS & Mercado for July was that the advantage of sugar over ethanol would oscillate by 10.02%. With this, the estimate was 2.70% above the effective data of 7.32% for the period. For August, SAFRAS & Mercado expects sugar to have an advantage of 6.77% over ethanol in the Brazilian physical market. These calculations take into account an average expectation of BRL 3.63 per liter for hydrated ethanol, BRL 3.58 for anhydrous ethanol, and a 50-kg bag of BRL 118.00 for crystal sugar with up to 150 Icumsa. In the long term, since January 2008, sugar has had a 29.79% advantage over ethanol. In the 2021/22 crop average for the commodity, the sugar advantage over ethanol reaches 8.77%.
SAFRAS Latam