Industry officials downplayed the lure of sugar to Brazil’s cane mills, even as they released data showing the sweetener’s growing popularity compared with ethanol in the output mix.
Cane crushers in Brazil’s key Centre South region crushed 44.03m tonnes of the crop in the second half of last month, a rise of 1.8% year on year, cane industry group Unica said.
The performance, which exceeded investors’ expectations, reflected settled weather.
“Contrary to what was observed in the first half of August, the drier climate in the second half of the month allowed for the advance of the [cane] harvest,” said Antonio de Padua Rodrigues, the Unica technical director.
Sugar vs ethanol
Sugar output expanded by 5.8% year on year for the period to 3.14m tonnes, outpacing the increase in crushing volumes to lift to 48.5% the proportion of cane sugars used to make sweetener, rather than being turned into ethanol.
That proportion was 1.6 points higher than in the first half of last month, and up 2.0 points on the mix the second half of August 2021.
It also exceeded the 46.3% figure expected by investors, according to a poll by S&P Global Platts.
The figure was nearly 4 points above the average of 44.7% of cane sugars which mills have made into sweetener over the whole of 2022-23, as started in April.
The data tally with ideas that tumbling Brazilian ethanol values, depressed by cuts by state-controlled Petrobras to gasoline prices, are encouraging mills able to alter their production mix to max out sugar output, at a cost to ethanol volumes.
The price of ethanol, in raw sugar terms, “stands below 14 cents a pound”, broker Marex reported this week.
That is well below the 18.39 cents a pound at which New York raw sugar futures for October were trading at on Thursday.
However, Unica identified the role of chance in the shift, in that processors able to make only ethanol are seeing a slower operational recovery from last season, when drought and frost curtailed the Centre South cane crop to a 10-year low of 530.2m tonnes, according to official crop bureau Conab.
The late-August, 2-point shift towards sugar in the production mix “can give a false impression of a change in the behaviour” of cane processors, he said.
“In fact, this increase is due to the lower participation of autonomous [ethanol-only] plants in crushing,” with the proportion of the crush they have been responsible for shrinking to 14.7% this season, from 16.0% last year.
In crushing plants able to switch capacity between sugar and ethanol “there is no significant change in the production mix”.
Output of ethanol in the second half of August fell by 1.2% year on year, to 2.25m litres, led by a 1.5% decline in hydrous ethanol, as used neat in car engines, and which competes directly with gasoline at fuel pumps.
Output of anhydrous ethanol, which is blended into gasoline, eased by a more modest 0.8%.
The resilience of sugar prices to the downturn in Brazilian ethanol volumes, and prices, is being attributed to strong demand for sweetener, as evident in a rise in London white sugar futures, which on Tuesday touched a 10-year high for a nearest-but-one contract of $620.30 per tonne.
While Centre South output beat expectations for the second half of last month, it is expected to prove weak for 2022-23 nonetheless, with shipments from India, which rivals Brazil as the top sugar producer, proving weak too.