Porto Alegre, October 19, 2020 – In September, sugar gains in the margin were greater than those of hydrated ethanol in the physical market, which led to the expansion of the commodity’s advantage over the biofuel. This strengthens the current stage of sugar advantage that has risen since February this year, when the equivalent prices of ethanol failed to be higher than those of crystal sugar with up to Icumsa 150. Before this, there was also a relatively short period of predominance of ethanol as a more attractive price derivative, with this period lasting between July 2019 and January 2020.
The average advantage of crystal sugar with up to Icumsa 150 in September, of around 30.44%, was above the mark of 24.75% in August. In July, this level was at 24.53%. This maintenance of the pattern of gains of sugar over hydrated ethanol, which has already lasted eight months, occurred due to more pronounced effects of sugar compared to ethanol. On the one hand, hydrated ethanol dropped by 0.45% a liter between August and September in Ribeirão Preto, while anhydrous ethanol in the same period ended up advancing by 6.53%, resulting in average highs of 3.04% from the biofuel.
In the meantime, sugar ended up advancing 7.64% from August to September, reinforcing the commodity’s advantage over the biofuel and neutralizing bullish movements of ethanol, whose monthly averages were already weakened. In September, mills still encountered a regular demand from consumer industries before the proximity to the off-season, which must occur in just over 30 days. In the meantime, mills were also more focused on the production of VHP to meet export contracts, which were already very high for this time of the year. SAFRAS & Mercado’s expectation is that the advances to be observed in both anhydrous and hydrated ethanol in October must be much more intense than those projected for crystal sugar with Icumsa 150, which already has its capacity for new gains well saturated in the short term. In other words, we can say that the window of expansion of ethanol gains is much wider than that of sugar, resulting in future price relation movements that are increasingly less favorable to sugar, as is the case of the October projection, which must point to gains of only 23% of the commodity over the biofuel.