CS Brazil H2 August sugar production seen up 17% on year: survey

São Paulo — Sugar production in Brazil's key Center-South region is expected to total 2.942 million mt in the second half of August, an increase of 17% year on year, an S&P Global Platts survey of 12 analysts showed Sept. 10.

An estimated 1.9 days were lost to rain in H2 August, and 260-265 mills were active as of Sept. 1.

"The second half of August was the first fortnight since H2 June that intensive rains managed to disrupt crushing activities for a short period of time," senior sugar analyst with Platts Analytics, Claudiu Covrig, said. "Therefore, we expect 1.8-1.9 crushing days were lost and with 261 mills operational we estimate mills crushed 43 million-44 million mt of cane, down from last year's 47.82 million mt."

Of the 12 analysts surveyed, the largest producer estimated the total cane crush would be 42.0 million mt.

The proportion of cane used for sugar production is expected to be 47.3%, up from 36.6% a year earlier.

"Mills continued to maximize sugar production in H2 August mainly due to better profitability of sugar against ethanol with the sugar premium over ethanol reaching 325 points in mid-August and 220 points by the end of August," Covrig said. "The combination of higher prices in New York No. 11 sugar futures and a weaker Brazilian real were the primary drivers for the elevated premium for sugar production."

Platts assessed hydrous ethanol ex-mill Ribeirao Preto converted into raw sugar equivalent at 10.48 cents/lb on Sept. 9. The October New York contract settled at 12.03 cents/lb on Sept. 9, meaning a 1.55 cents/lb premium to hydrous ethanol in raw sugar equivalent.

Recoverable sugar, or ATR, is expected to be 154.6 kg/mt, an increase of 2.5% year on year. Sufficient rainfall over the summer and consistently dry weather in CS Brazil since April 1 have allowed the cane to develop well and have a high sucrose concentration.

"We expect the cumulative ATR for the 2020-21 harvest to attain a record level, higher than 141 kg/mt, reaching a peak of about 157 kg/mt during 2H September before declining through the end of the harvest," Covrig said. "The elevated levels of ATR and mills maximizing sugar production lead us to believe there will be an additional 3.08 million mt of sugar and about 2.1 million cu m of ethanol produced during 2H August."

Total ethanol output from sugar cane during H2 August is expected to be 2.054 billion liters, a decrease of 24.6% year on year.

Hydrous ethanol output was expected to be 1.411 billion liters, according to the average of the analysts' responses to the survey. This would be a decrease of 26.7% year on year. Anhydrous ethanol output in H2 August was expected to be 642 million liters, a decrease of 19.6%.

The production mix of hydrous ethanol to anhydrous ethanol was expected to be 68.7%. The pandemic-related drop in demand for gasoline, hydrous ethanol's economic advantage over gasoline in Southeast Brazil, and a 6% higher associated cost of producing anhydrous ethanol were some of the reasons mills favored producing hydrous over anhydrous ethanol so far in the 2020-21 season.

CS Brazil Cane Production Data – 2H August 2020 (as of September 1)

*corn ethanol excluded; **Year-on-year change compares S&P Global Platts Survey against UNICA's figures for 2019-20

Sources: S&P Global Platts Pre-Report Survey of Analysts Results, S&P Global Platts Analytics, UNICA.