12 August 2009
In a near-repeat of what took place in June, rains during much of July led to a reduction not only in the available days for sugarcane crushing in South-Central Brazil, but also a drop in the sucrose content of the harvested cane.
The accumulated crushed cane total since the start of the harvest stood at 246.66 million tons at the end of July, 14.96% more than the overall figure for the same period in the previous harvest. However, the 35.9 million tons crushed specifically in the second half of July fell 5.98% below the same two-week period a year ago, a reduction caused primarily by wet weather conditions. The number of favorable days for harvesting in July 2009 reached 81.03% of total days available, far less than the historical average for the same month. The 91.93% utilization rate in July of 2008 meant only 2.5 days were lost a year ago, compared to 6 days lost in July of 2009.
States most affected by rain in July were Mato Grosso do Sul and Paraná, as well as the regions of Assis, Jaú and Piracicaba in São Paulo state. In the states of Goiás and Minas Gerais, climate conditions were favorable for the harvest. The number of favorable days for harvesting in other cane-growing states and regions in São Paulo remained within historical averages.
The most visible impact on production caused by weather conditions is the reduction in the quantity of products obtained per ton of crushed cane. While the total recoverable sugars obtained per ton of cane (known as ATR in Portuguese) hit 147.54 Kg during the second half of July a year ago, the ATR in the second half of July of this year fell to 137.61 Kg per ton, 9.93 Kg less than in the same two-week period in the previous harvest. While the rain benefited the vegetative development of the plant (tons of cane per hectare) within the harvested areas in June and July, it also affected the sucrose content of the harvested cane. Thus, even with favorable harvest conditions already seen during the first half of August, the product quantity per ton of processed cane will likely remain low because of climate conditions observed in July.
Between the beginning of the harvest and the end of July, 45% of the overall cane crush projected for the current harvest by the Brazilian Sugarcane Industry Association (UNICA) had been reached, although products obtained from the crushed cane were down by 841,000 tons in terms of total sugars. By August 1st, the quantity of products obtained per ton of crushed cane were 3.41 Kg below overall figures from the previous harvest. Even if climate conditions after mid-August remain favorable for sucrose content to accumulate, sugar and ethanol production will be compromised, with a known reduction at this stage of 340,000 tons of sugar and 280 million liters of ethanol. There are still uncertainties related to climate conditions for the remainder of the harvest, which will negatively affect results if trends observed so far continue, compromising overall totals even further in terms of quantity of products per ton of cane.
From the total amount of cane processed since the beginning of the harvest, 42.69% was directed to sugar production, resulting in an overall volume of 12.79 million tons, 19.25% more than the total reached in the same period of the previous harvest. Considering only the second half of July, the volume of sugar produced reached 2.13 million tons, 6.45% less than in the same two-week period a year ago. Mixed production mills, which produce both sugar and ethanol, should account for 82% of processed cane in South-Central Brazil. On average, these units have directed 50% of their cane to sugar production and 50% to ethanol. Units dedicated exclusively to ethanol production, known as autonomous distillers, accounted for 26% of ethanol output produced by the end of July.
Overall ethanol production in the current harvest reached 10.56 billion liters at the end of July, 7.55% higher than in the same period last year, while in the second week of July production totaled 1.58 billion liters, 16.44% lower than a year ago. The drop in production was caused by reduced crushing and a lower sucrose concentration caused by the wet weather. By the end of the year, it is expected that the percentage of harvested cane directed to sugar production will remain steady, within the 42.5% level projected at the beginning of the harvest.
Of the 23 new mills expected to launch activities in South-Central Brazil during the 2009/2010 harvest, 10 have already produced volumes included in the latest production totals. The remaining 13 are still expected to begin crushing during the current harvest.
A record volume of ethanol was delivered by units in South-Central Brazil to the domestic market in July. The total for the month topped 2.07 billion liters, of which 1.55 billion liters were hydrous ethanol, which is used in flex-fuel vehicles. The result is a direct consequence of the competitiveness of ethanol prices at the pump compared to gasoline in 22 Brazilian states, given the low prices paid to producers and the steadily growing number of flex-fuel vehicles on the road, which already account for 35% of all vehicles in Brazil. The overall volume of ethanol delivered in July was 21% greater than in July of 2008. Ethanol exports on the other hand reached 403 million liters since the start of the harvest, a 38.7% drop compared to last year. Exported volumes indicate that hydrous ethanol shipments are steady (-3.6% compared to year ago) while there’s a significant reduction in shipments of anhydrous ethanol exports (-65.5% compared to a year ago). The change is the result of exporting to the Caribbean for reprocessing instead of exporting anhydrous ethanol directly to the American market, as was the case last year.
Total sugar exports in July according to the Brazilian Foreign Trade Secretariat (Secex) reached 2.36 million tons, 16.6% higher than in July of 2008. Of the total exported, 73% is VHP-type and 27% white sugar (crystal and refined). From January to the end of July, accumulated sugar exports reached 12.68 million tons, compared to 9.33 million tons accumulated in the same period a year ago.
The data leads to the conclusion that market fundamentals are positive for the sugar-energy sector because of the rise in sugar exports, much higher prices in U.S. dollars than historic averages, plus rising domestic market demand for ethanol given competitive prices for renewable fuels against fossil fuels and a growing fleet of flex-fuel vehicles. Even though sugar prices are profitable, more than 57% of all cane processed is still being directed to ethanol, which is being sold below the cost of production. The inefficient use of available crushing time and the lower quantity of products extracted from the harvested sugarcane imply higher production costs, especially in the processing and harvesting stages.
August and September, typically the best periods for maturing sugarcane, when more than a quarter of the sugarcane harvest takes place, will be instrumental to the final numbers of the 2009/2010 harvest. A revised harvest projection has not yet been concluded by UNICA, but it is already possible to state that the current harvest will feature the lowest sucrose concentrations obtained per ton of harvested cane in a decade.
The data released in this harvest update was compiled and analyzed by UNICA, with figures provided by the following syndicates and associations of producers from the South-Central states:
- ALCOPAR — Association of Producers of Ethanol and Sugar in the State of Paraná
- BIOSUL — Association of Bioenergy Producers of Mato Grosso do Sul
- SIAMIG — Syndicate of Ethanol Manufacturing Industry in the State of Minas Gerais
- SIFAEG — Syndicate of Ethanol Producers of the State of Goiás
- SINDAAF — Fluminense Syndicate of Sugar and Ethanol Producers
- SINDALCOOL — Syndicate of Sugar and Ethanol Industry of Mato Grosso
- SUDES — Society of Plants and Distilleries of the State of Espirito Santo