Sao Paulo — The amount of sugarcane crushed in the second half of September in Brazil's key Center-South region is expected to be recorded at 27.92 million mt, an S&P Global Platts survey of analysts found Tuesday. This total would be down 27.5% year on year and 31% lower from the previous two-week period.

It would also be the lowest volume of cane crushed in the 2018-19 season since the start of the season when 22.25 million mt were crushed in H1 April.

Industry association UNICA will release its official production figures for the region on Wednesday at 10 am Sao Paulo time (1300 GMT).

 

Sources said the expected lower volume of sugarcane crushed could be a result of the days lost to heavy rainfall in the region.

 

Analysts surveyed by Platts expect an average of 4.8 days lost to rain and maintenance. This compares with less than two days lost in H1 September and only 0.8 day in the year-ago period.

 

If analysts' expectations are realized, the cumulative cane crush thus far this season (April 1-October 1) would reach 458.27 million mt, down 2.2% year on year.

 

A preliminary survey taken by UNICA in mid-September indicated that 20% of sampled mills are anticipating the end of the crop season within one to three months.

 

Corroborating the growing expectations of sudden death of the crop and a further-away season is a recent, sharp drop in the agricultural yield, which is expected to intensify in the coming weeks as the harvest advances in areas more affected by the drought and where cane is older.

 

S&P Global Platts Analytics estimates agricultural yield could drop to 68 mt/hectare in September from 70 mt/ha in August, a steep drop from the 77.9 mt/ha reached in July and down from 72.8 mt/ha a year earlier.

 

The cane's total recoverable sugar (ATR) is expected to show a significant fall as a result of the wet weather, at 151.02 kg/mt, down 5.95 kg/mt from the previous two weeks. That figure would be down 1.28 kg/mt year on year. From the analysts surveyed by Platts, the range was 149.7 kg/mt to 152 kg/mt.

 

The proportion of the cane used for sugar production in the Center-South in H2 September is expected decrease further to 33.93% in comparison with the 37.37% in the previous two-week period, according to the survey. It would also be much lower than the 44.09% registered in the year-ago period.

 

This would be a new record-low sugar mix for any H2 September period.

 

As a result, sugar production is expected to total 1.36 million mt in H2 September, a plunge of 47.3% year on year and 36% lower from H1 September.

 

Cumulative sugar production between April 1 and October 1 would reach 22.36 million mt, decreasing almost 24% year on year.

As more of the sugarcane is expected to continue to be used for ethanol production compared with last year, hydrous ethanol output in H2 September is expected to reach 1.1 billion liters. This would be down 2% from a year ago and 25% lower from H1 September.

 

This would be the first time in the 2018-19 season that hydrous ethanol output would be below the year-ago period.

 

Based on the analyst survey, cumulative hydrous ethanol production from April 1 through October 1 would be 51.3% higher than the year-ago period at 16.61 billion liters.

 

Brazilian hydrous ethanol prices in the major fuel-consuming region of Center-South Brazil surged Real 70/cu m over the past week, boosted by a combination of bullish fundamental aspects -- higher crude oil prices and heavy rains expected in cane-growing regions.

 

Platts assessed hydrous ethanol ex-mill Ribeirao Preto, including taxes, at Real 2,220/cu m on Monday, the highest assessed price for the 2018-19 CS crop starting April 1, and the highest price since March 23 when prices reached Real 2,320/cu m.

 

Market participants are expecting prices to reach the Real 2,500/cu m soon, which would be a new record high, surpassing the Real 2,320/cu m record hit on March 16, 2017.