Porto Alegre, June 4th 2024 – Unica’s most recent data on cane crushing and the production of derivatives brought some negative surprises to the market. Firstly, due to the decline in hydrated sales (along with an increase in anhydrous ethanol sales) and, secondly, the reduced growth rate in cane crushing and sugar production. Starting with sales of anhydrous and hydrated ethanol, it was possible to see that the first half of May registered demand from distributors at mills for 899 mln liters.
At first, that may seem positive, even more so when we project this value for the second half of the month and add one more day of daily average demand seen in the first fortnight (currently at 59.94 mln liters) to reach the final projection for May at 1.858 bln liters. The detail is that this volume is marginally smaller (-0.04%) than the 1.858 bln liters registered in April. The difference in absolute terms is just 692 thousand liters, practically negligible.
Amid this stability in the perspective of hydrated sales from mills to distributors from April to May (based on sales data from the first half of the month), we can see a slightly different path for anhydrous ethanol. This is because the reported sales of 468 mln liters in the first half of May, when projected for the second half of the month and increased by one more day of daily average demand in the first fortnight (at 31.25 mln liters), lead to the final outlook for May sales at the level of 937.72 mln liters.
Here we have a different scenario, since this demand is 3.90% higher (if confirmed, obviously) than sales of 902.48 mln liters in April. Therefore, we have a scenario in which, in the short term, we see hydrated ethanol falling 0.04% compared to the previous month and anhydrous ethanol advancing 3.90% from the same comparative perspective. One of the explanations is the reduction in the competitiveness levels of hydrated ethanol against gasoline from April to May, when the price ratio in São Paulo went from 61% to 65%. However, the deterioration in hydrated ethanol indicators does not end here.
This is because the most recent data from the ANP show losses in the market share of hydrated ethanol against gasoline from March to April (most recent data available), with gasoline going from 56.06% to 56.88%, amid a decline in hydrated ethanol from 28.53% to 27.48% market share. Before this, from February to March, the same pattern of market loss on the part of hydrated ethanol had already been observed, with hydrated ethanol falling from 28.83% to 28.53%, while gasoline advanced from 55.82% to 56, 06%.
In this context, it is natural that hydrated ethanol will no longer be able to boost its sales volumes from mills to distributors while anhydrous ethanol will regain its market share through gasoline, with the Unica data on the first half of May only now reflecting this change. This is because April still saw a 1.39% increase in hydrated ethanol sales over February, with anhydrous ethanol sales falling 3.73% in the same period. However, the data shown in April by the ANP will clearly impact the May statistics by Unica.
In terms of cane crushing, the market was surprised to see margin increases much lower than those seen at this time of year. This is because, although the volume of processed cane is accumulated at 95.41 mln tons, the volume of cane of 44.80 mln tons processed in the first half of May showed an increase compared to the previous fortnight of just 28.74%, against a growth of 120.12% seen in the second half of April compared to the first.
The same can be said about sugar, which had its fortnightly high pattern in the margin (compared to the immediately previous fortnight) retreating from +160.54% to +39.43% between the second half of April and the most recent data from the first half of May. SAFRAS & Mercado highlights that the rainfall seen in the first half of May was not enough to disrupt the cane harvest in the region. However, Unica did not explain why the intensity of cane crushing showed a low level of growth for this time of year, and SAFRAS & Mercado found that there is still a large volume of mills in their initial stage of production, which ended up generating this result.
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