Sugar production in the second half of April in Brazil's key Center-South region is expected to total 1,483 thousand mt, a plunge of 27% year on year, according to the consensus expectations of analysts surveyed by S&P Global Platts May 10.
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If analyst estimates prove to be right, this would be the lowest volume of sugar produced in any H2 April since the CS crop 2017-18, when 1,132 thousand mt was produced.
The strong dry weather hitting the CS region since 2020 has been hampering the beginning of the crop 2021-22, which officially started on April 1. Many sugar and ethanol producers favored to delay the start of the sugarcane harvesting willing to increase the productivity.
The amount of sugarcane crushed in H2 April is expected to total 30.46 million mt, down 20% from the prior year period, according to the survey. If the number is confirmed, the volume will be the smallest since the 2017-18 crop, when 24.26 million mt was crushed in the same period.
If this forecast proves to be right, the cumulative cane crush of the 2021-22 crop will be up to 46 million mt.
Of the 10 analysts surveyed, the cane crush estimate ranged from 28.59 million mt to 32 million mt.
Industry association UNICA is expected to release its official production figures in the upcoming days.
Cane's total recoverable sugar (ATR) is expected to fall to 117.71 kg/mt from 122 kg/mt in H2 April 2020.
The proportion of cane used for sugar production in CS Brazil in H2 April is expected to be a bit lower than in the prior year at 43.4% down from 45.76% in 2020, according to the survey.
Hydrous ethanol price rallied in the last two weeks of April, surging almost 10% from the first half of the month, additionally the E100 trade offers faster liquidity than sugar exports to producers who might have favored the ethanol production to optimize the cash flow.
Despite the punctual lower sugar mix on year, CS producers are expected to keep maximizing the sugar production, as the sweetener is still paying a premium in the export market over hydrous ethanol in the domestic.
The average of Platts hydrous ethanol assessment converted in raw sugar equivalent in the last 15 days of April was at 14.69 cents/lb, while the ICE NY11 sugar futures market average settlement was at 17.02 cents/lb, pointing to an average export premium of 2.33 cents/lb, or $51.37/mt, to domestic hydrous ethanol.
Considering the depreciation of the Brazilian Real against the US dollar, Brazilian sugar exporters would receive a premium of roughly Real 280/mt compared with the spot ethanol market.
Even with the slightly increase in the ethanol mix to 56.6% from 54.24% in the year-ago period, the total volume of ethanol produced is expected to fall 15.2% on the year to 1.35 billion liters, basically due to the lower volume of cane crushed and reduced ATR.
Production of hydrous ethanol -- used as a standalone E100 biofuel in Brazil -- is expected to fall 19.9% year on year to 880 million liters in H2 April, while anhydrous ethanol output during the period is expected to reach 363 million liters, a cut of 7.7%.
Anhydrous is used at a mandatory blending rate of 27% in Brazilian gasoline and the tight inventories in the country have been encouraging producers to shift a higher proportion of the total ethanol production to anhydrous.