Porto Alegre, December 3th, 2024 – The most recent data from Unica from the first half of November clearly showed the market that the production level of the current 2024/25 crop is already objectively in an off-season pattern. The 39% decline in the margin (current fortnight against the immediately preceding fortnight) in cane crushing and the 49% decline in sugar production not only brought the production curve down toward off-season standards but also showed the clear limitation of accumulated standards to continue growing from now on.
The crushing of 16 mln tons of cane in the first half of November raised the accumulated amount of the crop to 852 mln tons. With the fires in August, SAFRAS & Mercado reduced its estimate for the crushing of the Center-South to 588 mln tons, but with the rain in October and November, it was raised again to 592 mln tons. These new pieces of data from Unica reinforce SAFRAS & Mercado’s expectation regarding the crushing of 592 mln tons.
One of the highlights is the expected declines in sales of anhydrous and hydrated ethanol from mills to distributors. The weak demand in the first half of November is expected to reduce the month’s final volumes to lower levels compared to October. Sales of 888 mln liters are expected to result in the final demand of 1.77 bln liters, with a projected decline of 2.37% in the margin compared to the 1.82 bln liters seen in October.
Moreover, November does not have extra days in the calendar as October does, which reduces the statistical sample of additional days of consumption, reinforcing the short-term decline. Anhydrous ethanol, with sales of 490 mln liters in the first half of November, is expected to have a total demand for the month of 981 mln liters, down 11% YoY and 9.7% in the margin from the previous month. The slowdown in short-term demand for both anhydrous and hydrated ethanol partly reflects the supply in advance of distributors made in October.
Another factor that has contributed to the decline in sales is the issue of high stocks at mills at maximum storage capacity levels, causing distributors to postpone purchases to allow for mills to reduce prices to sell those stocks. Since the year’s peak of demand is historically in December, distributors may be leaving their intermediate stocks until the last minute to take advantage of this need to sell the mills’ stocks at lower prices.
Another important point that is in line with the expectations of SAFRAS & Mercado, which were addressed in this same space of our previous newsletter, is the issue of early crop closures by mills in the region. In the first half of November, 25 mills finished crushing activities, against 29 mills in the second half of October, with a clear short-term slowdown, which is the result of improved cane crop levels due to the rains that began in the second week of October. In comparison with the same period last year, there is practically an alignment with the 24 mills that were closing down their activities in that period.
Another important point to observe is the levels of TRS and production mix, which already show typical off-season patterns. The mix of 67% for ethanol and 43% for sugar already shows the typical pattern of high concentration on the biofuel in the off-season. The decline in TRS from 149 to 133 kg/ton between the second half of October and the first one of November also shows typical declines in the concentration characteristic of the off-season.