Commission assesses sugarcane production trends in the 25/26 harvest

The main destination for sugarcane this harvest will be sugar production, to the detriment of ethanol, even with the mandatory increase in the addition of anhydrous ethanol to gasoline, from 27% to 30%. This was the focus of the lecture by economist Raphael Delloiagono, market intelligence analyst at Pecege, during his presentation on the 25/26 harvest outlook and the price behavior of sugar, ethanol, and raw materials in the Center-South region, at the meeting of the Technical Commission on Sugarcane and Renewable Energy of the Federation of Agriculture and Livestock of the State of São Paulo (Faesp).

"Since the pandemic, sugar production has become much more advantageous than ethanol. Mills are moving to maximize their sugar production—their revenue potential—and then, with the remaining raw material, produce ethanol," he pointed out. No one will stop producing more sugar to produce more anhydrous ethanol to meet the mandatory demand for E30.

The increase in demand for anhydrous ethanol to meet the mandatory addition is estimated at nearly 1 billion liters, and this volume will come from the shift of production that would otherwise be destined for hydrous ethanol. With less hydrous ethanol available on the market, the price is likely to rise. According to the analyst, mills may benefit somewhat from this, but not significantly yet, around R$0,03 to R$0,04 cents in the price of hydrous ethanol, which could result in the final ATR of around R$0,01 in appreciation of the sector's raw material.

Regarding inputs, fertilizer prices are expected to increase considerably this harvest, by an average of 27%. For pesticides, prices are projected to remain stable. This scenario reinforces the importance of efficient production cost management by producers to mitigate lower productivity.

"This is an assessment of prices in the Center-South market. It's worth remembering that this year's sugarcane harvest will be smaller than the previous one, with prices recovering for ethanol and falling slightly for sugar. We'll have a second consecutive harvest with reduced sugarcane ethanol production and increased consumption, which could translate into a higher relative price for ethanol," Dolloiagono concluded.

Despite this more optimistic outlook, with a recovery in ethanol margins, Nelson Perez, coordinator of the Commission, remains more skeptical about the sugarcane sector's performance this year. "On the producers' side, the decrease in productivity and the anticipation of area reforms, due to the drought and fires that hit sugarcane fields in 2024, are putting pressure on the costs of the activity. We have been told numerous cases of property leasing as an alternative for rural producers to avoid losing income, since, in addition to last year's fires, the climate, with frost and lack of rain, has contributed to this perception."

Consecana-SP

The review process of the technical and economic parameters of Consecana-SP was also discussed. The Commission expressed concern about the impasse between representatives of the Brazilian Sugarcane and Bioenergy Industry Union (Unica) and the Organization of Sugarcane Producers Associations (Orplana), which has hindered progress in the ongoing discussion.

"This disagreement has created significant insecurity in the production chain and uncertainty regarding sugarcane price definition, directly affecting suppliers and the credibility and efficiency of the Consecana-SP model. It is crucial that the entities resume dialogue and seek consensus as quickly as possible on the revision of Consecana-SP. FAESP is available to assist in resolving these differences," commented the Commission Coordinator.

Faesp President Tirso Meirelles pledged to join the producers' defense. "I will reinforce with the Brazilian Agriculture and Livestock Confederation (CNA) the request that we finalize the project for a new index to update the Consecana value. It's unacceptable to go 12 years without an update, especially since this is stated in the statute."

Fire prevention

Faesp will send a new letter to the Undersecretary of State for the Environment, Jônatas Souza das Trindade, regarding the regulations that address fire prevention in São Paulo.

The manager of the Sustainability Department, José Luiz Fontes, clarified that the initial draft penalized producers and did not define the integration between departments in the process. "We understand the importance of the Department of the Environment, but in terms of prevention, the participation of the Departments of Agriculture and Supply, Public Security, and Civil Defense would be essential, as there are implications for all of these areas. We will reiterate our concern about the approaching dry season and the risks to rural producers," he noted.

The meeting was attended by the managers of the Technical and Economic Department, Cláudio Brisolara, and the Legal Department, Thiago Soares. The Technical Committee included Nelson Perez, Milton Luiz Sarto, Cyro Penna, Roberto Carmanham de Figueiredo, José Osvaldo Junqueira Franco, and Bruno Garcia, as well as technician Erica Barros. Gustavo Chavaglia attended the meeting online.