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Brazil's Center-South H2 Sep sugar production expected to fall 23.3% on year: survey

Highlights

Cane crush forecast at 34 million mt

Sugar production to be 2.198 million mt

Total ethanol production pegged at 1.83 billion liters

Brazil's key Center-South would post sugar production at 2.198 million mt in the second half of September, a drop of 23.3% on the year, according to analysts' consensus expectations surveyed by S&P Global Platts Oct. 8.

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The reduced sugar production estimate could be mostly attributed to the second consecutive year of rains below the historical average in the CS region, resulting in a drop in agricultural yields.

Market participants estimated that most producers from CS Brazil will conclude the crushing season 2021-22 in mid-November.

The total recoverable sugar is also expected to decrease to 154.9 kg/mt from 161.18 kg/mt in second-half September 2020, according to the survey. Although on a year-on-year comparison the volume shows a considerable drop, the expectation was still within the last five years' average of 152.76 kg/mt.

The amount of sugarcane crushed in H2 September is expected to total 34 million mt, down 15.9% from the prior-year period, according to the survey, suggesting that the CS region's crop is indeed reaching an end earlier than usual.

As a reference, CS Brazil mills crushed 36.9 million mt in first-half October 2020.

If the analysts' estimates prove to be right, this will be the lowest volume of sugarcane crushed in any H2 September period since the crop 2014-15, when 28.81 million mt were crushed in the same period.

Considering the estimated crush for the two-week period, the cumulative cane crush of the 2021-22 crop will be 464.97 million mt, down 7.35% from the same period of 2020.

Of the 11 analysts surveyed, the cane crush estimate ranged from 31.9 million mt to 36.5 million mt.

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

The proportion of cane used for sugar production in CS Brazil in H2 September is expected to be lower than in the prior year at 44.4%, down from 46.2% in 2020, according to the survey.

Strong market concerns about ethanol availability and the steady upward price movement of the biofuel could be the main reasons driving the sugar mix decision in the period.

Despite the punctual lower sugar mix on the year, CS producers are expected to keep maximizing sugar production in the next CS crop 2022-23, as the sweetener is still paying a premium in the export market over hydrous ethanol in the domestic market.

The average of Platts hydrous ethanol assessment converted in raw sugar equivalent in the last 15 days of September was 18.29 cents/lb, while the ICE NY11 sugar futures market average settlement was 19.17 cents/lb, pointing to an average export premium of 0.88 cents/lb, or $19/mt, to domestic hydrous ethanol.

Combining the expected lower volume of cane crushed and ATR, with a slight increase in the ethanol mix to 55.6% from 52.7% in the year-ago period, the total volume of ethanol produced is expected to plunge 20% on the year to 1.83 billion liters.

Production of hydrous ethanol -- used as a standalone E100 biofuel in Brazil -- is expected at 1.08 billion liters in H2 September, down 26.1% on the year, while anhydrous ethanol output during the same period is expected to reach 780 million liters, down 4.9% on the year.