2019/20 sugar crop already moves away from production peak


The Unica’s most recent report on the country’s production data during the first half of September provided a clear indication of the current season’s production limits in terms of cane and sugar supply curve. Seasonally this was already expected in view of the season and also of the effects of early July frost that resulted in a drop in productivity by 5 tons of cane per hectare in an area of ​​400,000 hectares between northern Paraná and southern São Paulo, resulting in losses of 2 million tons.

However, this information is not new, but the effects on sugarcane fields and on the supply curve will still be “new” in the next weeks and also for the 2020/21 crop. Reinforcing this issue, data from the first half of September also pointed to decline in reaped area yield in the margin, although the Unica’s report only highlighted the 8% gains YoY. In fact, annual advances are relatively important and worth being highlighted, but even more important is the 6% decrease from the immediately previous month.

This may be another factor supporting sugar and ethanol prices further ahead, which of course must already occur due to the negative seasonal slope in the supply curve. In addition, we have the data of strong demand for hydrated ethanol at the pumps, which must keep growing in favor of ethanol, a factor that would naturally occur with the approach of the end of the crop, but that must be further reinforced with the strong demand for the biofuel at the pumps.

On the sugar side we also have the issue of support from both the reduction in production and from the concentration of the mix in favor of ethanol. The fall in sugarcane productivity in the monthly evolution of this crop reinforces this scenario. However, as industry demand has been weak so far, price advances have also been moderate. But not everything is lost. This is because the proximity of October brings the imminence of year-end holidays that generate extra demand for the commodity, which, according to Unica’s data, finds a restricted supply amid a smaller and less productive volume of sugarcane. Therefore, the final ingredient for a strong sugar reaction in the physical market is almost being added to the market, as reinforced by the moderate increase in trading prices of crystal with Icumsa 150 on the average of the interior of São Paulo, which is already heading for BRL 62, coming from BRL 59 at the beginning of the month.

Back to the data on the first half of September, the year’s overall cane harvest advanced 1.85%, along with a 5.61% drop in sugar production, combined with a 1.85% decline in anhydrous production, which contrasts with a 7.49% increase in hydrated ethanol production. In the margin, the cane harvest fell 17.38%, sugar production dropped 19.04%, while anhydrous ethanol production decreased 14.65% along with a 12.26% decline in hydrated ethanol supply. Another important point is the YoY reduction in raw material quality, with TRS around 154.22 kg/ton of cane, 1.75% below 156.97 kg/ton seen in the same moment of the previous crop, but 2.17% above the immediately previous fortnight, when until then the yield of TRS fluctuated by 150.94 kg/ton. Moreover, the TRS level of the first half of September was 3.07% above the average of the last five years for the same period, which currently fluctuates by 149.63 kg/ton. The average over the last five years has risen by 0.82% from 148.40 to current 149.63 kg/ton. Relative to the year’s average of 132.30 kg/ton, TRS in the first half of September was 16.57% above the accumulated data so far. The accumulated average of the year itself increased by 1.68% from 127.80 to 132.30 kg/ton.

The production mix for ethanol is more concentrated on the biofuel. Currently the ethanol mix fluctuates by 64.90% and is 2.17% higher than 62.73% in the same time last year, as well as 1.45% above the immediately preceding fortnight, when the mix was 63.45% more focused on ethanol, and 0.54% below the accumulated average of the crop, which fluctuates by 65.44%. Sugar absorbs 34.56% on average during the season, lower than indicated in the first half of September, which had a mix of 35.10% of reaped cane. With the expansion in the margin of the ethanol mix, the crop presents a surplus in the hydrated supply in the accumulated season [compared to the same time of the previous year] from +0.29% to +1.00% when comparing the current values of 15.96 billion liters with 15.80 billion accumulated until the same time of the previous crop.

In line with this increase in cumulative supply, sales of hydrated ethanol in the domestic market hit 911 million liters in the period, down 3.94% from the same time last month, with a demand volume of 949 million. Anhydrous ethanol had an internal demand in the Center-South of 336 million liters, below the 393 of the same time last season. Looking more closely, we observe that in the first half of September, the crush volume hit 39.48 million tons of cane. The current biweekly volume is 3.209% above the average of the last five seasons for the same period, which fluctuates by 38.26 million tons. Looking at sugar supply, we can see a production of 2.03 million tons of the commodity.

The current biweekly volume is 10.85% below the average of the last five years for the same period, which oscillates by 2.28 million tons. In the accumulated season, sugarcane crush reached 437 million tons, up 2.65% from 426 million tons processed in the five-year average for the same period. In turn, the accumulated sugar production fluctuates by 20.00 million tons, down 11.67% from 22.65 million tons of the average of the last five seasons. Regarding cane productivity, the most recent data available for August show a rate of 76.05 tons per hectare, a volume 8.64% above 70.00 tons observed in the same fortnight of the previous year. In the margin we can see a 6.43% drop from 81.28 tons per hectare of the immediately previous month, in July, as well as a 1.99% decline from the average of the last 3 years for the same period, which points to a yield of 74.56 tons per hectare for this time of year. August data are also 8.76% below the annual cumulative average of 83.55 tons per hectare.