January is marked by cane crush of 1 mln tons in Brazil’s Center-South

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The most recent data from Unica on cane crushing for the current 2023/24 crop show that the final volumes of the current season already marginally exceed 645 mln tons. SAFRAS & Mercado has been warning its consulting clients that the season is expected to close at the end of February with 650 mln tons of cane processed in the region. It is within this context that data from the first half of January came in line with the continued high volumes of crushing for the current phase of the cane off-season in the Center-South. This is because the first half of January was an atypical period with below-average rainfall over all cane areas in the Center-South, which allowed mills to continue crushing cane practically the same way they had been doing it since December last year.

Furthermore, as the 2023/24 crop is considered an unprecedented record for the region, the excessive volume of cane present in cane fields also allowed for the existence of raw material to be processed in the first two months of the current off-season stage. SAFRAS & Mercado warns that the current volume of cane crushing in the first half of January at 1.10 mln tons proved to be very atypical for this time of year, highlighting the little rain that led to the crushing progress reported above. Just to have an idea, the cane crushing of 1.10 mln tons in the first half of January is 193% above the five-year average in the same period, of nearly 377 thousand tons.

Furthermore, reinforcing the atypical tone that the crushing of over 1.0 mln tons of cane in the first half of January alone represents, we have the comparison to the same moment last year, which shows an increase of 152% over the 439 thousand tons processed until then. Despite this, SAFRAS & Mercado warns that the second half of January will be a period with less crushing activity. Firstly, because a large part of the crop will have already been reaped. Secondly, the rain has returned to the cane fields of the Center-South since the fourth week of January and should probably extend into the transition week from January to February, even though the third week of January continued with dry weather over the cane fields of the Center-South.

Another point that drew attention in the report was the divergent behavior between anhydrous and hydrated ethanol sales in the first half of the month. Considering the hydrated ethanol sales of 769.16 mln in the first half of January and adding them to the projection for the second half of the month, we would reach a sales potential of 1.592 bln liters. However, January is a month of 31 days, which requires that we pick the average daily sales for the first half of January, of 53.078 mln liters, and add them to this total projection for the period, which amounts to 1.645 bln liters expected for the January total. This volume will be 164.96 mln liters lower than the sales in December, the immediately previous month.

The same cannot be said about anhydrous ethanol, which, with sales of 478.53 mln liters in the first half of January, may have a final demand of 988.97 mln liters, considering the addition of an extra day in the month, with the average daily volume for the first half of January of 31.902 mln liters, with the total volume projected for February being 90.75 mln liters higher than December sales. In general, SAFRAS & Mercado warns that this report was bearish for prices in New York given the strong level of cane crushing above 1 mln tons seen in January, which is considered very atypical for this time of year.