BRAZIL: Platts sees H2 crush at 47.01 million tonnes

Published: 08/10/2018, 8:42:09 AM

The amount of sugarcane crushed in the second half of July in Brazil's key Centre-South region is expected to be 47.01 million tonnes, down 7.6% year on year, but 4.8% higher than the previous two-week period, according to an S&P Global Platts survey of analysts.

Industry association UNICA is expected to release its official production figures for the region later this week.

Extremely dry weather persisted in Centre-South Brazil in H2 July, speeding the pace of crush and taking sucrose content higher.

If analysts' expectations were realized, the cumulative cane crush thus far this season would reach 314.43 million tonnes, up 5.4% year on year.

July was the driest month in CS Brazil since January. In Sao Paulo state -- where the weather was the driest -- rainfall was 90.2% below the historical average.

The excessive dryness is accelerating the pace of crushing but it is also expected to bring the crop to end earlier than usual. Most analysts have recently revised their crush estimates lower in response to the adverse weather.

The 2018/19 sugarcane season officially started April 1 in Centre-South Brazil, the world's largest sugarcane and sugar-producing region.

The consensus estimate for the cane's total recoverable sugar (ATR) in the second half of July is 149.48 kg/tonne, with individual forecasts ranging from 148.5 kg/tonne to 150.5 kg/tonne.

The consensus ATR figure would be up 9.27 kg/tonne year on year and 4.01 kg/tonne higher than in H1 July.

It would also be the highest ATR so far this season and the highest for the period since the 2008-09 crop, when the ATR posted was 150 kg/tonne.

The proportion of the cane that will be used for sugar production in the Centre-South in H1 July is expected to show a recovery at 39.23%, according to the survey, up from 38.4% in H1 July but still down from 50.35% in the year-ago period.

This would be the highest sugar mix so far this season but actually the lowest for the period since 1997-98.

As a result, sugar production is expected to total 2.635 million tonnes in H2 July, down 23.1% year on year, but up 10% from H1 July.

Cumulative sugar production between April 1 and July 31 would reach 14.77 million tonnes, down 16.2% year on year, if the analysts' expectations were to be met.

As more of the sugarcane is expected to be used for ethanol production compared with last year, market participants believe that with the combined high ATR and cane crush in the period, the industry could once again -- for the third consecutive two-week period -- hit a record-high hydrous ethanol production.

Hydrous ethanol output in H2 July is expected to reach 1.62 billion liters, which would be a new all-time high and up 42% from a year ago. It is would also be 2.3% higher compared with H1 July.

April 1 through July 31 hydrous ethanol production would be 66.1% higher than the year-ago period at 10.86 billion liters if the forecast is correct.

Record production rates have been outpacing demand growth, consequently pushing stocks higher and weighing on spot prices.

S&P Global Platts' assessment of hydrous ethanol ex-mill Ribeirao Preto hit the lowest in over a year at BRL1,710/cu m on Monday. It recovered to BRL1,725/cu m on Wednesday as rains have finally started to reach many cane growing regions.

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.