Porto Alegre, February 03, 2020 – The Unica’s most recent biweekly report on the cane crop and production of derivatives of Brazil’s Center-South, with data referring to the first half of January, brought very specific information to the market, given the period of the height of the off-season in the main producing region of Brazil. Textually, besides the numbers themselves, we can highlight the indication of an increase of more than 42% in the ethanol demand for sanitary purposes, which occurs due to the pandemic and the need for greater care with hygiene. This has partially offset the decline in the demand for fuels, which, with internal sales indications of 819 million liters, tends to have a projected demand of nearly 1.64 billion if the same consumption pattern of the first half of the month is repeated in the second.
However, this would still place domestic hydrated demand at a very low level even for the new pattern of limited recovery from the pandemic crisis. In April, the month of lowest demand of the previous year, monthly sales of hydrated ethanol in the Center-South hit 1.2 billion liters, a volume recovered only until the top at 1.89 billion in October 2020. However, this was an exception, as the other months kept oscillating between 1.46 and 1.75 billion liters per month. Therefore, if the projection for the end of January is confirmed, the data must put the first month of 2020 in line with the low demand pattern of partial recovery after April 2020.
On the side of the cane harvest and sugar production, there is little news, given the tone of seasonally advanced peak of the off-season. One of them is the indication that there are still some mills at work (three units of cane, five of corn, and two flex units), which makes the proportion of biweekly corn supply much higher than that of cane. However, as we have warned in previous issues, this is only due to the statistical loading from the cane off-season. In general, the indications are that the cane supply exceeds 600 million tons in the region, while that of sugar would be close to 38 million tons in the accumulated volume of the season. In this context, anhydrous ethanol must maintain the pattern of 9.6 billion liters, while hydrated ethanol would stay at 19.9 billion liters.
In terms of climate, the UNICA’s report no longer mentions drought, crop or productivity losses in cane fields, which had been usual since July last year, a season of low rainfall in the region, but which until then was mentioned as the cause of a possible decline in production, which has not been confirmed given that the data on the supply of cane show, in the accumulated result for the year, gains of more than 3%, which, as we confirm, is going to 600 million tons. Since this same time, SAFRAS & Mercado has warned that historically the season was characterized by little rain, and that it was too soon to connect that phase to occasional production losses for the season that was then developing.