Porto Alegre, August 02, 2021 – The most recent bimonthly report from the Sugarcane Industry Association (Unica) with data on the first half of July has not yet been able to answer a very important question: what are the crop losses of the current season? Some clues are already given when we observe some textual comments from the report. The first one is about the indication that only in August the effective losses of the three frost events that occurred in the Center-South will be known. This had already been forecast by SAFRAS & Mercado since the second week of July through direct contacts with consulting clients.
Another questioned point is the growth capacity of the corn ethanol supply, given the high cereal prices. However, this is an issue that becomes superfluous due to the low internal demand for hydrated ethanol. The projected data for the first half of July indicate the month demand must hit nearly 1.40 billion liters in the Center-South, which is a low volume even by the standards of the pandemic crisis. This level of demand is also almost identical to that observed in June, which was in line with SAFRAS & Mercado’s expectations for the period. In general, anhydrous ethanol continues to positively surprise in terms of growth, driven by gasoline sales, which respond to the lack of competitiveness of hydrated ethanol since April.
Ethanol supply responds to this picture. While the hydrated ethanol production retreated 13% this year, that of anhydrous ethanol grew 32%. In general, in the margin, the levels remain positive within a very moderate scale, preceding an abrupt supply decline for the next few weeks. As we had warned last week, this must be one of the last (if not the last indeed) reports in which the bimonthly supply curve is bending up. The accumulated effects of the drought together with the three frost events must strongly impact the supply curve throughout the second half of July onward, reinforcing the reading that SAFRAS & Mercado has supported since early June, by pointing that the season must be much shorter in the Center-South, with the first units ending the crush 30 to 60 days before the official calendar, in December.