Sugar production in the second half of May in Brazil’s key Center-South region is expected to total 2.590 million mt, a slight annual increase of 1.3%, according to the consensus expectations of analysts surveyed by S&P Global Platts on June 8.
If analyst estimates prove to be right, this will be the highest historical volume of sugar produced in any H2 May. That sugar uptick can be mostly attributed to the strong dry weather in the CS region, which has been converted in an increased ATR – the cane’s total recoverable sugar. Many producers from CS Brazil postponed the beginning of the 2021-22 sugarcane crushing willing to increase the productivity after almost one year of rains below the normal average in the region. According to the survey, the ATR is expected to increase to 136.52 kg/mt from 133.83 kg/mt in H2 May 2020. If this estimative proves to be right, it will be the highest ATR for the period since the crop 2006-07, when it was recorded at 137.7kg/mt of cane.
The amount of sugarcane crushed in H2 May is expected to total 43.04 million mt, up 1.5% from the prior-year period, according to the survey, proving that CS mills are now fully operative. If this forecast proves to be right, the cumulative cane crush of the 2021-22 crop will be up to 129 million mt. Of the 12 analysts surveyed, the cane crush estimate ranged from 40.03 million mt to 44.2 million mt. Industry association UNICA is expected to release its official production figures in the upcoming days.The proportion of cane used for sugar production in CS Brazil in H2 May is expected to be a bit lower than in the prior year at 46.2%, down from 47.26% in 2020, according to the survey.
Strong market concerns about anhydrous ethanol availability and the steady upward price movement of the biofuel could be the main reasons driving the sugar mix decision in the period. Despite the punctual lower sugar mix on year, CS producers are expected to keep maximizing sugar production, as the sweetener is still paying a premium in the export market over hydrous ethanol in the domestic market. The average of Platts hydrous ethanol assessment converted in raw sugar equivalent in the last 15 days of May was 16.36 cents/lb, while the ICE NY11 sugar futures market average settlement was 17 cents/lb, pointing to an average export premium of 0.64 cents/lb, or $14/mt, to domestic hydrous ethanol.
Combining the expected higher volume of cane crushed and ATR, with a slight increase in the ethanol mix to 53.8% from 52.74% in the year-ago period, the total volume of ethanol produced is expected to increase 3.3% on the year to 1.88 billion liters. Production of hydrous ethanol used as a standalone E100 biofuel in Brazil — is expected at 1.23 billion liters in H2 May, up 0.7% on year, while anhydrous ethanol output during the period is expected to reach 643 million liters, a surge of 20.6% on year. Anhydrous is used at a mandatory blending rate of 27% in Brazilian gasoline and the tight inventories in the country have been encouraging producers to shift a higher proportion of the total ethanol production to anhydrous.