Porto Alegre, October 3th, 2022 – The total fall in the Gross Production Value (GPV) stems from the decline in the soybean volume. In the case of cane, the GPV has dropped due to falling prices, even though production is on the rise in terms of volume. The most recent data on the GPV of Brazilian agribusiness indicate a very negative trend for the sector. The GPV of agribusiness and crops has shown signs of decline due to the decrease in soybean volumes this season. The GPV of cane has fallen due to the price lows of by-products, of both anhydrous and hydrated ethanol and crystal and VHP sugar. Because of all variations of cane by-products, there is a downward trend underway, mainly from the medium-term perspective. This explains the 14% decline in the cane GPV between July and August (the most recent month), which corresponds to a negative financial adjustment of just over BRL 17 billion.
In addition to the decrease in the margin, this year we observe an increase of just over 10%, even though the price deflation of the previous year greatly reduced this advantage. Even so, it is important to note that the cane GPV estimated in August, in the range of BRL 103 billion, has been heading toward the level of BRL 100, in strong contrast to what was seen at the beginning of the year, when the cane GPV was already close to BRL 115 billion. Until then, in view of the recovery in crop volume, SAFRAS & Mercado was estimating the cane GPV at BRL 120 billion by the end of 2022, an estimate which is no longer supported by the fall in production volume, but by the continuous decline in the prices of cane by-products.
It is important to remember that the main product that makes up the GPV of cane, VHP sugar for exports, is guided by the New York Stock Exchange, which is in a strong downward trend due to the arrival of the new 2022/23 crop in Asia, with large production volume and expansion of exports from India and Thailand. In addition, in Brazil’s Center-South, the market was not aligned with the estimates of the second survey by the National Supply Company (Conab) for the current season, which points to a cane crop of 514 million tons for the region, below the figures for the previous crop, 2021/22, which had a volume of 524 million tons, a record decline and worst drought in a season. Therefore, the cane GPV may stay at BRL 100 billion by the end of 2022.
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