BRAZIL: Platts sees H1 November crush up 3.2% on year
Published: 11/23/2017, 2:57:40 PM
The amount of sugarcane crushed in Brazil's key Centre-South region in the first half of November was expected to total 22.46 million tonnes, up 3.2% year on year, a survey of analysts by S&P Global Platts found Thursday.
The 2017/18 sugarcane season started April 1 in the Centre-South, the world's largest sugarcane and sugar-producing region.
Industry association UNICA will release its official production figures for the region early next week.
Were the analysts' expectations to be met, the volume of sugarcane crushed would be down 25% compared with the prior two weeks, when 30.02 million tonnes was crushed.
The decline in the crush was likely due to wet weather in the first half of November, with analysts expecting almost five days were lost to rain in the period, hampering the pace of the crush and lowering the ATR, or total recoverable sugar level.
Although the rain was impacting the pace of the crush, the wet weather was welcomed. Due to an extended period of drought in CS Brazil this year, the rain was seen as a necessity to ensure the cane growth and agricultural productivity for the next season as the cane age is now beyond ideal, estimated at four years old.
Additionally, the 2017/18 crush season is approaching its end in December, thus it is normal to see cane values drop at this time of the year.
The consensus for the cane's ATR in the first half of November was 138.5 kg/tonne, with individual forecasts ranging from 132-144.9 kg/tonne. That would be higher than the 137.4 kg/tonne ATR in the year-ago period but lower than the surprising 153.64 kg/tonne reached in the last two-week period.
The high ATR levels seen in the last two-week period were distorted by rains and stoppages occurring at the end of the crushing period, analysts said. Therefore, the lower levels expected for the H1 November will show a correction to that.
"The rains in H2 October happened in last 3-4 days of the crush so there was a lot of product output despite less cane coming in. The way UNICA and the market calculates the ATR, which is the so called 'ATR Product', takes into account the amount of product produced versus the amount of cane crushed to get to the ATR level,' an analyst said. That was instead of calculating a sample of the sucrose level from the cane entering the mill to be crushed, analysts said.
With ethanol continuing to provide a better payday better than sugar in the first half of November, the proportion of sugarcane directed to sugar production was expected to have decreased to 41.32%, according to the survey, from 42.85% in the prior two weeks and compared with 47.96% a year ago.
The sugar mix was expected to continue to drop as ethanol continued to provide a better return than sugar and as lower ATR levels should favor ethanol output.
Ethanol production turned more profitable than sugar in early August for the first time since the first quarter of 2016, according to Platts data.
Hydrous ethanol's average premium over raw sugar stood at 0.78 cent/lb through the first 23 days of November, according to calculations by Platts. In comparison, in the same period of October that average was 0.84 cent/lb.
Hydrous ethanol output in the first half of November was expected to have been 618 million litres, up 36% year on year, while anhydrous production was forecast at 451 million litres, down 0.8%, according to the survey.
Higher hydrous production rates were responding to a shift in consumer demand at the pump, which has recently switched back to the biofuel option as it became more competitive relative to gasoline.
Domestic sales of hydrous ethanol in Brazil's Centre-South region in October were 1.5 billion litres, up 22% from a year ago and up 8% from September, according to data from industry association UNICA. That was the highest level since September 2015 when sales totaled 1.7 billion litres.
The increase in ethanol's share of the mix over the past few weeks has translated into a recovery in production rates compared with a year ago.
Overall cumulative ethanol production was expected to be 0.6% higher compared with the past season at 23.6 billion litres.
Considering the average poll results for the crush, the cumulative volume in the first 7.5 months of the season was expected to have reached 552 million tonnes, down 2% year on year.
Despite the fall in crush volume, cumulative sugar production was expected to be 2.3% higher year on year at 34.3 million tonnes.