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Highlights

Sugar production falls 40.1% from H1 September levels

H2 September ATR falls to 147.61 kg/mt of cane

Cumulative hydrous ethanol output 16.85 billion liters

Houston — A total of 27.64 million mt of sugarcane was crushed in Center-South Brazil during the second half of September, down 28.2% from the 38.51 million mt crushed in the first half of September, and down 31.7% from 40.46 million mt crushed in the year-ago period, according to data released by trade association UNICA Wednesday.

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The volume crushed was about 280,000 mt below market expectations, according to an S&P Global Platts survey of analysts released Tuesday. Wet weather during the period was cited as the reason for the decrease.

"This is the first fortnight in which the milling of the current crop fell short of that observed in the previous crop year. This reduction is concentrated in the states of Sao Paulo and Parana," said Antonio de Padua Rodrigues, technical director at UNICA.

The cumulative cane crushed so far this season is now up to 457.93 million mt, down 2.31% from 468.78 million mt in the year-ago period, according to UNICA.

Data from the Sugarcane Technology Center showed a 10.5% decrease in the yield to 64.79 mt/hectare in September from 72.39 mt/hectare in September 2017.

The 2018-2019 sugarcane season began April 1 in the key Center-South region, the largest sugarcane and sugar producer in the world. But chronic dryness is widely expected to bring an early end to crushing, with the season seen closing a month to six weeks earlier than usual. Five mills have already ended their crushing, while another 32 mills are expected to stop operations by October 15, UNICA said.

Total Recoverable Sugar (ATR) levels averaged 147.61 kg/mt of cane in H2 September, down 6% from 156.97 kg/mt in H1 September, and down 7.34% from the 159.30 kg/mt recorded in the year-ago period. The H2 September level missed market expectations of 151.02 kg/mt.

Dry weather seen since the start of the season in the Center-South has bolstered the average ATR level since April 1 to 140.34 kg/mt. That represents an increase of 3.1% over the same period in crop year 2017-2018, according to UNICA.

Sugar production in Center-South Brazil in H2 September totaled 1.286 million mt, down 40.1% from H1 September production of 2.147 million mt, and down 55% from 2.859 million mt produced during the year-ago period, UNICA said. Production during the period missed estimates by 74,000 mt.

Cumulative sugar production between April 1 and September 30 was 22.273 million mt, down 24.1% from crop year 2017-2018, when 29.338 million mt was produced. The total missed the Platts survey estimate by 87,000 mt.

Brazilian mills have shifted production toward hydrous ethanol due to its greater profitability and strong sales. Hydrous ethanol output in H2 September reached 1.14 billion liters, down 26.9% from H1 September production of 1.56 billion liters, and down 0.1% from the year-ago period. The total beat analyst expectations of 1.1 billion liters, according to UNICA.

Cumulative hydrous ethanol output has risen 51.87% year on year, hitting 16.85 billion liters so far in crop year 2018-2019, compared with 11.1 billion liters in the same 2017-2018 period.

Anhydrous ethanol production in H2 September reached 494 million liters, down 29.1% from H1 September production of 697 million liters, and down 44.91% from the year-ago period. Cumulative anhydrous production was up to 7.541 billion liters through September 30, down 10.32% year on year.

Mill production of ethanol versus sugar production rose 4.19 percentage points compared with H1 September to 66.92% in H2 September, while sugar production fell the same amount to 33.08% over the same period.

"The expansion of ethanol production registered to date, considering the trend of change in the production mix of the companies, should result in a reduction of the 2018-19 sugar supply of at least 9 million mt compared with the previous season," Rodrigues said.

The cumulative share for sugar production and ethanol production by mills is now 36.37% sugar and 63.63% ethanol, with the share of ethanol production increasing 11.88 percentage points from the previous harvest, when 48.25% of cane went to sugar production and 51.75% to ethanol production.

Total ethanol sales are now up to 1.33 billion liters, an increase of 1.5% from the 1.31 billion liters sold in H1 September, and 8.54% higher than the 1.22 billion liters sold during the year-ago period.

Hydrous ethanol sales remained high in H2 September, totaling 925.50 million liters in H2 September, representing a 29% increase compared with H2 September 2017, UNICA said. Anhydrous ethanol sales totaled 324.01 million liters, down from 379.12 million liters sold during the year-ago period.

On a cumulative basis, total ethanol sales from April 1 through September 30 totaled 14.91 billion liters, with 14.05 billion liters sold domestically and 858.15 million liters exported, according to the data. The total represents an increase of 17.71% compared with the same period during the 2017-2018 harvest, UNICA said.

-- Jordan Young, jordan.young@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com