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CS Brazil H2 October sugarcane crush down 21% on year; sugar mix record low: survey

Sao Paulo — The amount of sugarcane crushed in the second half of October in Brazil's key Center-South region is expected to be 23.87 million mt, down almost 21% year on year and almost 7% lower than the previous two-week period, an S&P Global Platts survey of analysts found Thursday.

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This would be the lowest volume of cane crushed in the 2018-19 season since the start of the season when 22.25 million mt were crushed in H1 April.

Industry association UNICA will release its official production figures later this week.

The lower volume of sugarcane is explained by sources as a result of the days lost to heavy rainfall in the region and as we approach the end of the crushing season.

Some 79 mills are expected to have already crushing by November 1, UNICA said. This compares with 18 units by this time last year, according to Platts Analytics estimates.

Analysts surveyed by Platts expect an average of 5.4 days lost to rain and maintenance. This compares 6.2 days lost in H1 October and 4.2 days in the year-ago period.

If analysts' expectations were realized, the cumulative cane crush thus far this season (April 1- November 1) would reach 507.4 million mt, down 4.5% year on year.

CS Brazil Cane Production Data – H2 Oct 2018 (as of Nov 1)
Category Unit Survey Platts UNICA (2017-18) Y-O-Y** var. Vol. y-o-y**
Cane crush (million mt) 23.87 24.3 30.144 -0.2078 -6.264
ATR (kg/mt cane) 136.4 138 153.64 -0.11221 -17.24
Sugar output (thousand mt) 953 1003 1891 -0.49603 -938
Ethanol total (million ltr) 1337 1354 1551 * -0.13798 -214
Hydrous output (million ltr) 919 940 905 * 0.01547 14
Anhydrous output (million ltr) 418 414 646 * -0.35294 -228
Sugar Mix (%) 30.51 31.4 42.85
Ethanol Mix (%) 69.49 68.6 57.15
*corn ethanol excluded
Sources: S&P Global Platts Pre-Report Survey of Analysts Results, S&P Global Platts Analytics, UNICA.
**Year-on-year change compares S&P Global Platts Survey against UNICA's figures for 2017-18

According to S&P Global Platts Analytics, the decline compared to a year ago is widening as we reach the tail end of the crop.

This is attributed to a combination of recent drops in agricultural yields, the pace of mills closures and heavy rains since the start of October.

The cane's total recoverable sugar (ATR) is expected to show a significant drop due to the wet weather at 136.4 kg/mt, down from 142.51 kg/mt in the previous two weeks. That figure would be a sharp drop of 17.24 kg/mt year on year. From the analysts surveyed by Platts the range was between 132.7 kg/mt to 138.6 kg/mt.

The proportion of cane used for sugar production in the Center-South in H2 October is expected have further decreased in comparison to the 32.17% in the previous two weeks period at 30.51%, according to the survey. It would also be extremely lower than the 42.85% registered in the year-ago period.

This would be a new record low sugar mix for any H2 October period and the lowest since the start of the season when the mix reached 31.4% in H1 April.

As a result, sugar production is expected to total 953,000 mt in H2 October, a plunge of 49.6% year on year and 15% lower from H1 October.

Cumulative sugar production between April 1 and November 1 would reach 24.34 million mt, decreasing almost 25% year on year. This is the lowest for the period in 10 years, since the 2008-09 crop.

As more of the sugarcane is expected to continue to be used for ethanol production compared with last year, hydrous ethanol output in H2 October is expected to reach 919 million liters. This would be up 1.6% from a year ago but 9% lower from H1 October. This would be the lowest since the start of the season in H1 April.

Based on the analyst survey, April 1-through-November 1 cumulative hydrous ethanol production would be 45.4% higher than the year-ago period at 18.56 billion liters.

The volume is a new all-time high and already exceeds the total volume produced in the entire season of 2010-11 when a record 17.97 billion liters have been reached.

Despite the recent drops in production in the past two-week periods, Brazilian hydrous ethanol prices in the major fuel-consuming region of the Center-South eased over the past week, triggered by lower crude oil prices and a strong valuation of the Brazilian real against the US dollar which ultimately translate to lower gasoline prices in country. Elevated stocks are also seen pressuring prices.

Platts assessed hydrous ethanol ex-mill Ribeirao Preto, including taxes, at Real 2,050/cu m on Wednesday, down Real 95/cu m or 4.4% on the week.

Brazil's state-led Petrobras announced on Wednesday it was lowering gasoline ex-refinery prices for the fourth consecutive day, down to Real 1.6958/liter as of Friday. This is the lowest since mid-April. Gasoline ex-refinery prices in Brazil have decreased over 9% since the start of November.

Ethanol in Brazil is used in two ways: hydrous ethanol is used as E100 fuel in flex-fuel vehicles and competes with gasoline at the pump when its price is 70% or less of the gasoline price, while anhydrous has a mandatory blend rate of 27% for gasoline.

--Beatriz Pupo, Beatriz.pupo@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com