Center-South Brazil's H1 July sugar production expected to surge 59% on year: survey

Santos — Sugar production in the first half of July in Brazil's key Center-South region is expected to total 3.087 million mt, a spike of 59% year on year, according to consensus expectations of analysts surveyed by S&P Global Platts July 22.

If analyst estimates prove to be right, this would be the most sugar produced in any fortnight since H1 July 2017, when during this period of the crop year 3.114 million mt were produced.

Brazilian sugar production has been breaking records since the beginning of the 2020-21 Center-South crop on April 1, as the international price in the local real currency has been remunerating better than ethanol in the domestic market.

The amount of sugarcane crushed in the first half of July is expected to total 45.80 million mt, 11.7% more than the prior year period, according to the survey.

If this forecast proves to be right, the cumulative cane crush of the 2020-21 crop will be up to 275.19 million mt. Considering the total cane crush estimated by Platts Analytics at 600 million mt, this cumulative number would represent 45.86% of the crop already harvested.

Of the 10 analysts surveyed, the cane crushed ranged from 44.8 million mt to 47.8 million mt.

Industry association UNICA is expected to release its official production figures in the coming days.

The analysts surveyed by Platts expect an average of less than half day of crushing stoppages in the analyzed period, which was mostly attributed to dry weather.

Cane's total recoverable sugar (ATR) is expected to rise to 142.9 kg/mt from 138.1 kg/mt in H1 July 2019. The expected ATR will be one of the highest recorded in this period.

The proportion of cane used for sugar production in CS Brazil in H1 July is expected to surge to 48.32% from 36% a year earlier, according to the survey. The larger share of cane being converted for sugar production is due to higher export sugar prices compared to domestic ethanol.

Platts assessed hydrous ethanol converted in raw sugar equivalent at 10.17 cents/lb July 22, while the ICE NY11 sugar futures market settled at 11.86 cents/lb, pointing to an export premium of 1.69 cents/lb, or $37.26/mt to domestic hydrous ethanol.

With the recent depreciation of the real, Brazilian sugar exports would receive a premium of roughly Real 190/mt compared with the spot ethanol market.

As the ethanol mix is expected to fall dramatically to 51.68% from 64% in the year-ago period, the total volume of cane ethanol produced is expected to fall 4.1% on the year to 2.04 billion liters.

Production of hydrous ethanol -- used as a standalone E100 biofuel in Brazil -- is expected to fall 2.9% year on year to 1.39 billion liters in H1 July, while anhydrous ethanol output during the period is expected to reach 655 million liters, a cut of 6.6%. Anhydrous is used at a mandatory blending rate of 27% in Brazilian gasoline.