Brazil cane mills sideline sugar output in ramp-up to new crushing season
Cane processors in Brazil are leaning heavily towards ethanol production in the run-up to the new crushing season, industry group Unica said, although the data failed to prevent a fresh decline sugar futures.
Crushers in Brazil’s Centre South, responsible for some 90% of domestic cane output, processed 3.28m tonnes of the crop in the first half of March, a rise of some 1.7% year on year, Unica data showed.
However, ethanol output soared 13.2% to 161,000 litres, as mills ramped up the proportion of cane processed into biofuel rather than sugar.
While early and late season periods – the Centre South crushing season starts on April 1 – typically see ethanol favoured over sugar, for cashflow and operational reasons, the emphasis on the biofuel was particularly strong this time, with only 16.5% of cane turned sugar.
That compares with 24.1% for the first half of March last year, and a 2017-18 average of 46.7%.
Sugar vs ethanol
Indeed, Centre South sugar output for the period fell by 36% year on year to just 47,000 tonnes.
The decline underlines the incentive that current prices of ethanol and sugar are giving to mills to prioritise output of the biofuel, with Rabobank this week estimating that it is going for the equivalent of 18.0 cents a pound in sugar terms.
Many Brazilian producers have cited the potential for a large switch in the Centre South towards ethanol, once the new crushing season starts next month, as a potential catalyst for a recovery in sugar prices.
However, New York raw sugar futures for May on Friday fell by 1.7% to 12.55 cents a pound, returning to among their lowest levels in nine months.
“The production of more ethanol was already expected in early March due to the attractiveness of ethanol” in the Brazilian market, said Antonio de Padua Rodrigues, Unica technical director.
Ethanol price drop ahead?
Rabobank added in its briefing this week, which saw potential for sugar prices to recovery to around 14.5 cents a pound at the end of 2018, that if the ethanol price in sugar terms – the so-called ethanol parity – “does not plummet close to within 2 cents of the raw sugar price, all mills will favour ethanol over sugar.
“However, as we approach the start of the harvest in Brazil, we expect to see a decline in ethanol prices.”
Unica said that as of March 16, 42 Centre South mills were in operation, after the seasonal break, which started late in the calendar year, to allow for maintenance, and avoid weather which is often difficult for cane harvesting.
Source: Agrimoney – Published on: 23/03/2018