Sugar production should increase 6,7% in the year

Sugar production in the Center-South region of Brazil is expected to total 3,25 million tons in the second half of July, reflecting an increase of 6,7% in the year, according to research by S&P Global Commodity Insights released today, August 09th. For eleven analysts consulted, the sugarcane crushing estimate ranged from 48,0 million tons to 49,5 million tons for the second half of July. The average estimate was for a total sugarcane crushing of 48,6 million tons, an increase of 3,6% in the year. The weather in the Center-South was favorable for crushing during the second half of July, with less than a day expected of rain and around 255-260 mills active on August 1st.

“The market consensus is that grinding should exceed the same compared to last fortnight and that sugar blending should continue to increase compared to previous fortnights,” according to Platts Analytics. "Additionally, the range of analyst estimates for the second half of July is in a fairly tight range."

The proportion of cane used for sugar production is expected to be 47,6%, above the previous year's percentage, which was 46,2%. Brazilian producers took advantage of the recent rise in ethanol prices during the early stages of the harvest, but now long-term expectations are for mills to maximize their sugar production during the second half of the harvest.

Platts assessed that hydrous ethanol ex-mill Ribeirão Preto converted into raw sugar equivalent ex-CBIOs was 16,66 cents/lb on August 8, according to data from S&P Global. The NY11 October sugar futures contract closed on August 8 at 17,96 cents/lb, a premium of 1,30 cents/lb over the price of hydrous ethanol expressed in raw sugar equivalent ex-CBIOs.

The sugar premium for ethanol production would approach 0,50 cents/lb if decarbonization credits were added to the premium calculation. The CBIO, equivalent to 1 mt of CO2 not released into the atmosphere, is an instrument issued by biofuel producers and importers to ensure that Brazil achieves its decarbonization goals.

Recoverable sugar per ton of sugar cane, or ATR, is expected to be 14731 kg/mt, a reduction of 0,1% for the year. Total ethanol production from sugar cane is expected to reach 2,38 billion liters in the second half of July, an increase of 1,3% in the year. The expected production of hydrated ethanol was 1,45 billion liters, according to the average of analysts' responses to the survey. This would represent an increase of 5,8% for the year. Anhydrous ethanol production in the second half of July was 931 million liters, 4,9% lower than the previous year, according to the survey.

Industry association UNICA is expected to release its official production figures early next week.