Porto Alegre, April 19, 2021 – The month of March was a period marked by a brief deceleration of the average levels of advantage of crystal sugar with up to Icumsa 150 over the trading averages of anhydrous and hydrated ethanol. Since December 2020, crystal sugar has moved away from the average pattern of gains of 42% against the biofuel.
Last month was marked by a continuous gradual loss of the advantage of sugar over the average of anhydrous and hydrated ethanol, with the commodity having posted gains of 11% over the biofuel. In February, these gains averaged 17%, after starting the year at around 35%. Still in December 2020, the average price ratio between crystal sugar with up to Icumsa 150 and the average price of anhydrous and hydrated ethanol fluctuated by 42%, and since then the patterns of this advantage have declined continuously, as occurred last March.
In the short term, the movement basically reflects the biofuel gains in the period, which exponentially exceeded the marginal advances that sugar had in the short term. Although the commodity has had relatively firm price support in the domestic market [which is positive given the proximity of the beginning of next season], the fact is that hydrated ethanol ended up showing very high volatility in the period, which resulted in the reduction of the advantage over sugar.
In this context, in March, the average trading volume of anhydrous ethanol fluctuated by BRL 3.12 per liter, while hydrated ethanol fluctuated by BRL 3.22 per liter, both in the Ribeirão Preto region. These values converted into 50-kg bags were equivalent to BRL 93.56 and BRL 100.67 respectively, which results in the average of BRL 97.11 which serves as a comparison with sugar. In the same period and in the same region, a 50-kg bag of crystal sugar, with up to Icumsa 150, fluctuated at the level of BRL 107.89. With this, the price advantage of white sugar over ethanol [average of anhydrous and hydrated ethanol prices traded in the same period and region] traded in the domestic market was 11.09% in March.
The sugar advantage dropped 6.0% from the previous month, when the commodity paid 17.10% more than the biofuel. Despite this, when we compare it with March last year, we can see a decline in the advantage of 4.0% of sugar over ethanol, since at that time the commodity paid 15.09% more than the biofuel. Against the crop’s average, the March data were 19.0% below the current performance of 30.10% of the 2021/22 season.
SAFRAS & Mercado’s expectation for March was that the advantage of sugar over ethanol would fluctuate around 5.48%. As a result, the estimate was 5.61% below the effective data of 11.09% for the period. For April,
SAFRAS & Mercado expects an advantage of sugar over ethanol of 23.89% in the Brazilian physical market. These calculations take into account the average expectation of BRL 2.85 a liter for hydrated ethanol, BRL 2.73 for anhydrous ethanol, and a 50-kg bag of BRL 106.00. In the long run, since January 2008, sugar has had a 30.32% advantage over ethanol. On the average of the 2020/21 season, sugar has an advantage of 23.89% over ethanol.