Porto Alegre, May 21th, 2024 – The most recent data from Unica for the second half of April showed the seasonal pattern of growth in cane crushing, which boosted the production of all derivatives. In this sense, the report did not bring any statistical surprises regarding the behavior of the data presented. Yet, Safras & Mercado draws attention to the indications of sales of anhydrous and hydrated ethanol by mills to distributors in April, with sales of hydrated ethanol at 1.85 bln liters, showing an increase of 66% YoY and 1.39% in the margin besides an increase of 23% over its 5-year average over the same period.
Last month, Safras & Mercado estimated a final demand for April of 1.86 bln liters, which was only 0.32% above the actual data for the period. Anhydrous sales in April, accumulated at 902 mln liters, showed an increase of 8% YoY and a strong decline of 3.7% in the margin, besides being 25% above its 5-year average in the same period. In the previous month, SAFRAS & Mercado estimated the demand for anhydrous ethanol in April at 926 mln liters, which ended up being 2.69% above the actual data for the period. Here, again, we have a reflection of the larger share of hydrated ethanol in the Otto Cycle in a pattern that has been seen in the market since August 2023.
The most recent ANP data for March show that hydrated ethanol accounted for 28.53% of total sales of light fuels between anhydrous ethanol, hydrated ethanol, and gasoline. Since August last year, hydrated has already accumulated advances of 10% in capturing demand from the Otto Cycle, while gasoline and anhydrous ethanol have lost respectively 7.92 and 2.18% of share in the total demand for the fuel. It is clear that April’s 3.73% decline in anhydrous sales amid a 1.39% increase in hydrated sales (both in the margin, compared to the previous month) reflects this market context.
Analyzing the textual part of Unica’s report, we can highlight that we have 217 mills in operation in the Center-South and that another 31 mills started the new crop during the first half of May, totaling 248 mills in activity in the current crop, with a general expectation that 248 mills to process cane this season. Another important point that Unica reinforces in its report is its expectation of a decline in cane yield for the coming few months, which should generate negative impacts on the production of both sugar and ethanol.
In this sense, Safras & Mercado warns that the decline in productivity expected for cane should be observed in the second half of the current crop, due to the last minimally rainy off-season in the cane fields of the Center-South. Even so, mills must maintain their sugar production indications firm over the season, besides maintaining firm plans for anhydrous ethanol production, with hydrated ethanol bearing the negative impact from the decline in the cane crop to be observed during this season.
Even so, as the weather has remained rainless in the cane fields of the Center-South since the beginning of the second half of April and remained so until the end of the first half of May, the intensity of cane crushing will continue to grow strongly in the coming reports from Unica, mainly in the first and second half of May, even though the production levels of derivatives show increasingly limited growth capacity due to the low quality and productivity of the cane to be reaped from June.
One of the indications of this is the strong decline observed in TRS levels, which, in the second half of April, fell 6.66% from the first half of the month, besides being 0.75% lower than the 5-year average in the same period. Even so, the most recent TRS data are 2.52% higher than those seen at the same time last year and 3.57% above the average for the current crop. Even so, SAFRAS & Mercado warns that these levels of advantage appear to be very weak and should be lost in the next fortnight.
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