Santos — Cumulative sugar production in Center-South Brazil reached 10.56 million mt from April 1 to June 16, a 57.09% surge from the same period in the prior year, sugar industry association UNICA published June 24.
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In the first 15 days of June, sugar production was at 2.549 million mt, up 36.28% year on year, but 265,000 mt below what market participants estimated in a survey S&P Global Platts published June 22.
The volume was the highest historical sugar production for the same period. The previous record was during the 2017-2018 crop year, when 2.390 million mt were produced.
The uptick in the sugar production has been observed since April 1, the start of the CS Brazil 2020-2021 crop year, since sugar prices in the export market have been paying much higher premiums than ethanol prices in the domestic market.
From April 1 to June 16 the average Platts hydrous ethanol assessment converted to raw sugar equivalent at 8.72 cents/lb, or a 1.95 cents discount to the average settlement of the first month of the ICE New York 11 sugar futures contract.
While the volume of sugarcane crushed in the first half of June was down 1.91% from the prior year at 41.74 million mt, the cumulative was up 8.77% at 186.57 million mt or nearly 31% from the total cane crush of 600 million mt that S&P Global Platts Analytics estimated for the 2020-2021 crop period.
Producers from CS Brazil were still maximizing sugar production, converting 47.11% of the total cane crushed in H1 June in sugar, up from 35.69% in the prior year. The accumulated sugar mix points to 46.17%, up from 33.94% in the prior crop.
Ethanol production, sales
While producers felt encouraged to maximize sugar to meet export market demand, in the ethanol market the combination of the coronavirus outbreak and an oil price collapse in early March hampered domestic consumption and prices.
From April 1 to June 16, total ethanol production reached 8.04 billion liters, down 3.69% year on year. From the total hydrous ethanol, the E100 standalone biofuel was at 5.8 billion liters, down 2.03%, while anhydrous, which is used as a mandatory blend of 27% in gasoline, was at 2.2 billion liters, down 7.76%.
Even with a lower ethanol mix, the fast production pace in CS Brazil has still delivered a volume much higher than current demand.
Hydrous ethanol sales to the domestic market reported by mills in H1 June totaled 735 million liters, a year-on-year drop of 19.61%. Domestic sales reached 3.39 billion liters so far in the crop year, a roughly 30% drop year on year.
According to Platts calculations that consider the average price of Platts hydrous ethanol assessment from April 1 to June 16 and the equivalent volume sold by mills to the domestic market in the period, the industry profitability was at Real 6.12 billion, or 40% below the same period of 2019.
While the domestic demand was capped by the consumption crisis, part of the losses was covered by higher exported volumes. Hydrous ethanol exports totaled 196 million liters from April 1 to H1 June, a 737% jump from the 23 million liters recorded in the same period of 2019.
As part of the lack of consumption in the domestic market was offset by higher exports, total ethanol sales since April 1 fell 24% to 5.15 billion liters in 2020 from 6.85 billion liters in 2019.
Market participants were estimating that with the lifting of coronavirus-restriction measures in the largest Brazilian cities, the drop in light fuel demand could reach 10% compared with 2019, keeping pressure on Brazilian ethanol prices.