Porto Alegre, November 21th, 2023 – The most recent data from Unica for the second half of October showed a scenario of slight recovery in short-term crushing with an increase in the margin (compared to the previous fortnight) of 5.23% for cane crushing, 4.35% for sugar manufacturing as well as gains of 2.97% for the production of anhydrous ethanol and an increase of 2.45% for the production of hydrated ethanol. In the textual part, Unica’s report did not bring very impactful information to the market, just pointing to production volumes and rains over cane fields in the Center-South in the second half of October.
Furthermore, the report shows that sales remain high due to the competitiveness levels of hydrated ethanol against gasoline, which has been pointed out by SAFRAS & Mercado since June this year. The important detail comes from the sales of hydrated ethanol in the Center-South, which in October totaled 1.70 bln liters, up 6.44% from SAFRAS & Mercado’s expectations for the period, 1.6 bln liters, and up 3.35% from the previous month’s sales of 1.64 bln liters. YoY gains of 29.69% were also strong compared to 1.31 bln liters seen in October last year.
For anhydrous ethanol, the volumes also surprised positively. This means that sales of 959 mln liters in October were 10% above SAFRAS & Mercado’s expectations of 871 mln liters for the period. The annual growth was also noticeable at 1.75%, besides a 3.48% rise in the margin. It is evident that the broader levels of competitiveness of hydrated ethanol against gasoline have kept its demand increasing to a level marginally above 1.70 bln liters, while anhydrous ethanol, despite reacting, has not managed to reach the level of 1.00 bln liters.
As competitiveness levels remain high for hydrated ethanol in important consumer states such as São Paulo, Minas Gerais, Paraná, Goiás, and Mato Grosso do Sul, this new demand pattern above 1.6 bln liters may be maintained in November, even though the data for the first half of this month are known. Another important point that SAFRAS & Mercado warns about is the new decline in the quality of cane, which has occurred since the first half of October due to the rains that have been more frequent in the cane fields of the Center-South. The peak of the season so far (and probably henceforth) was the second half of September, with 154.25 kg/ton.
After this, in the first and second half of October, we had decreasing levels of TRS, respectively at 149.57 and 146.59 Kg/ton. As the rains go on in November and are expected to increase in December and January (at least), further declines might happen in the biweekly TRS indices for the remainder of this crop toward 140.00 kg/ton in the expectations of SAFRAS & Mercado. Another point is the production mix for ethanol, which has fluctuated again above 50% since the first half of October, when until then it fluctuated at 51.88%, and now the most recent data for the second half of October point to 51.31%. Once again, SAFRAS & Mercado warns of the deepening levels of ethanol share in the production mix toward 52% given the growth of hydrated ethanol sales in the physical market, already at the level of 1.70 bln liters a month from October, remembering that November, December, and January will see additional demand growth due to the end of year vacations.
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