Porto Alegre, January 31 th, 2022 – While crystal sugar had an increase of just over 1% in the margin, anhydrous and hydrated ethanol retreated 6% from November to December, explaining the increase in premiums. December was a period of important advance in the premiums of crystal sugar with up to Icumsa 150 over the average prices of anhydrous and hydrated ethanol, all traded in the physical market and converted into BRL/50 kg. Basically, the dynamics of the increase in premiums occurred in the face of the appreciation, albeit marginal, of crystal sugar in the short term due to significant lows in both anhydrous and hydrated ethanol. As the trend for January 2022 is for moderate gains for sugar and small downward adjustments for ethanol, this premium ratio, which currently oscillates around 19%, may rise further in this first month of 2022 towards 29%. Mills still need to further reduce the saturation of the loss of competitiveness of hydrated ethanol against gasoline, a vector that has not existed since April 2021.
On the other hand, the mills that trade crystal sugar have found a favorable scenario to sustain prices in the short term due to the longer off-season and the record-breaking production losses of the previous season. Even the scenario of strong reduction in the buying force in the short term is not a major problem, since many mills have withdrawn from the over-the-counter market and sustained the recent price level of crystal sugar. Therefore, while ethanol has room for some decline, sugar has strength for, at worst, short-term stability until the demand from food-processing industries appears again, which will occur in early March.
In this context, in December, the average trading price of anhydrous ethanol fluctuated by BRL 4.08 per liter, while hydrated ethanol fluctuated by BRL 4.04 a liter, both in the Ribeirão Preto region. These values converted into 50-kilogram bags were equivalent to BRL 122.35 and 126.35, respectively, which result in the average of BRL 124.35, which serves as a comparison with sugar. In the same period and same region, a 50-kilogram bag of crystal sugar with up to Icumsa 150 fluctuated by BRL 155.11 against BRL 155.00 in the immediately previous month. As a result, the price advantage of white sugar over ethanol (average of anhydrous and hydrated ethanol prices traded in the same period and region) in the domestic market was 19.01% in December.
The advantage of sugar ended up retreating 22.36% from the same time of the previous year when the commodity was 42.26% more profitable than the negotiations with the biofuel. Despite this, when compared to the immediately previous month, we can observe an advance in the advantage of 8.68% of sugar over ethanol when the commodity was 10.33% more profitable than biofuel. Compared to the crop’s average, the December data showed an increase of 7.54%, with the 2021/22 crop average being 11.47%.
SAFRAS & Mercado’s expectation for December was that the advantage of sugar over ethanol would fluctuate by 19.01%, which came in line with the effective data for the period. For January 2022, SAFRAS & Mercado expects the advantage of sugar over ethanol in the Brazilian physical market to reach 29.19%. These calculations take into account an average expectation of BRL 3.98 per liter for hydrated ethanol, BRL 3.90 for anhydrous ethanol, and BRL 156.00 for a 50-kg bag of crystal sugar with up to Icumsa 150.