Porto Alegre, February 17, 2021 – Data from the second half of January show a decrease in the margin of nearly 6% in the sales of hydrated ethanol between December and January. Demand remains lukewarm in the Center-South
Besides the most recent data on hydrated ethanol sales, the updated report brings little news but reaffirms that the region is at its peak in the off-season and without textual references to either crop losses or drought in the region.
In times of little fundamental news, amid descriptions of tables and reaffirmation of concepts already expected by the market, the most recent biweekly report on sugarcane crush and production of derivatives in the Center-South, updated by Unica, actually draws more attention to what it does not say. Besides the data on hydrated ethanol sales in the physical market, which we discuss below, it is interesting to note that once again there was no mention of ‘drought,’ ‘dry period,’ or ‘crop losses,’ as observed in publications over the second half of 2020.
At that time, we had until then a seasonal season of low rainfall in the region, in line with historical patterns. However, there were frequent, not only in this publication but also in other external vehicles, correlations and associations with and estimates for the low volumes of rain registered up to then [clearly within the normal range for the time of year] with the forecast of losses in the following season.
Still at that time, SAFRAS & Mercado warned that climate models were indicating regular rain over the producing regions of the Center-South in the off-season to come – what we have actually observed since early November. After that point, the second highlight on the important figures from Unica is on the sales of hydrated ethanol, which are falling again. The updated figures for the second half of January show that, in the total for the first month of 2021, demand was only at 1.65 billion liters. This accounts for a 6.18% decline YoY [against 1.76 billion in January 2020] and a 5.66% decline in the margin [against 1.75 billion in December 2020]. In comparison with the average demand for the season, which is currently at 1.61 billion liters, January sales were 2.22% higher, while for the 5-year average for the same period they were 9.78% higher.
In general, the market is at the peak of an off-season that must precede a season with a volume of 605 million tons of cane in the Center-South versus the current volume of 598 million. For sugar, we will have a supply of 40 million tons in the region, against the current volume of 38.20 million. Hydrated ethanol must have a supply of 20 billion liters, against 19.9 billion of the current crop, while the supply of anhydrous ethanol must hit 10 billion liters, against 9.98 billion in the current crop.