CS Brazil H2 June sugar production expected to fall 13.6% on year: survey

Sugar production in the key Center-South Brazil region is expected to total 2.5 million mt in the second half of June, reflecting a decrease of 13.6% on the year, an S&P Global Commodity Insights survey of 10 analysts showed July 8.

During the survey, the cane crush estimate ranged from 41.0 million mt to 46.9 million mt for H2 June. The average estimate was for a total cane crush of 42.6 million mt, a 6.3% fall on the year.

Weather in the Center-South was favorable for crushing during H2 June, with less than one day expected lost to rain and about 250-255 mills active as of July 1.

"Weather was favorable during H2 June allowing mills to maximize crushing," according to Platts Analytics. "The variables most anticipated by the market in H2 June are the evolution of the ATR, which has been below expectations in the previous fortnights, and the sugar mix after the most recent drop in the price of ethanol."

The proportion of cane used for sugar production is expected to be 45.3%, down from 47.6% a year earlier. Brazilian producers took advantage of the recent high price of ethanol during the early stages of the harvest, but now mills are expected to start shifting more of their cane crush toward sugar production.

Platts assessed hydrous ethanol ex-mill Ribeirao Preto converted into raw sugar equivalent at 16.23 cents/lb on July 7, according to S&P Global data. The October NY11 sugar futures contract settled July 7 at 18.52 cents/lb, reflecting a 2.29 cents/lb premium to the hydrous ethanol price expressed in raw sugar equivalent ex-CBIOs.

Sugar's premium to ethanol production would move closer to 1.40 cents/lb if decarbonization credits were added into the premium calculation. The CBIO, equivalent to 1 mt of CO2 not released into the atmosphere, is an instrument issued by biofuel producers and importers to ensure Brazil attains its decarbonization targets.

Recoverable sugar per ton of sugar cane, or ATR, is expected to be 137.3 kg/mt, a decrease of 3.1% on the year.

Total ethanol output from sugar cane is expected to be 1.98 billion liters, down 6.0% on the year.

Hydrous ethanol output was expected to be 1.24 billion liters, according to the average of the analysts' responses to the survey. This would be a decrease of 0.3% on the year. Anhydrous ethanol output in H2 June was expected to be 737 million liters, 14.2% lower on the year, according to the survey.

Industry association UNICA is expected to release its official production figures early next week.

CS Brazil Cane Production Data – H2 June 2022 (as of July 1)

*Corn ethanol included

Sources: S&P Global Commodity Insights Pre-Report Survey of Analysts Results, UNICA

**Year-on-year change compares S&P Global Commodity Insights Survey against UNICA's figures for 2021-22