Data from Unica’s most recent report on the second half of January showed that, as expected, cane crushing and sugar production in the region are at residual levels. The processing of 239 thousand tons of cane gave rise to only 7.3 thousand tons of sugar. However, some points caught the market’s attention. The first one was the increase in anhydrous ethanol production in contrast to the decline in hydrated ethanol production.
In the second half of January, the output of 165 mln liters of anhydrous ethanol accounted for a 19% increase in the margin (compared to the immediately preceding fortnight) while the production of hydrated ethanol, of 227 mln liters, showed a 5% decrease in the margin. Just to contextualize it, the crushing of 239 thousand tons of cane was 24% lower in the margin, and the production of 7.3 thousand tons of sugar represented a 40% decrease in the margin.
SAFRAS & Mercado warns that in the final movements of the current 2024/25 crop, the production of anhydrous ethanol has been accelerated by mills, also because the movements in the supply of hydrated ethanol, given the need to meet the period of purchases in advance by distributors, which bought many volumes for the rest of the year, which accounted for 90% of the expected demand for gasoline, in line with the ANP’s determinations for forward purchases of anhydrous ethanol.
Special attention should be paid to the sales of anhydrous and hydrated ethanol from mills to distributors in January. Historically, this is the period of lowest demand for ethanol in the year, both at the pumps for end consumers and from mills to distributors. However, the atypical movement in January reflected a market scenario in which many distributors were more active in demand, taking advantage of the lower prices observed until then, especially during the second half of January.
Distributors were aware of the risk of the off-season worsening with the long Carnival holiday in early March, which should generate very intense pent-up demand in the weeks leading up to this event, amid a much earlier-than-normal off-season. Even with high stocks for the period, they continue to be under pressure to be sold over the months, leaving the supply scenario clearly far from comfortable.
To give an idea, the demand for anhydrous ethanol in January, of 1.08 bln liters, showed a 5% increase YoY, gains of 4% in the margin, even though it was 3% lower than SAFRA & Mercado’s expectation for the period, which indicated sales of 1.12 bln liters. Hydrated ethanol, in turn, with sales of 1.83 bln liters closed in January, showed a 3% increase both in the year and in the margin, and was 10% higher than SAFRAS & Mercado’s expectation for the period, which had been 1.66 bln liters.
Despite this, SAFRAS & Mercado warns that, besides the 19 cane mills that remain in operation in the Center-South in January (above the 15 mills that SAFRAS & Mercado estimated for this time of year, which has a historical average of 10 mills), February should see another 5 mills entering staring cane crushing in advance for the future 2025/26 season in the first half of February (a season which, according to the calendar, only starts in April) along with another 15 mills in the second half of the month. For March, SAFRAS & Mercado expects another 38 mills in the first half of March and 50 mills in the second half of the month. This will ensure a strong recovery in the level of ethanol supply in the short term, even before the 2025/26 crop officially begins in April.
