The 2018-19 sugarcane crush in Brazil will be larger and produce more ethanol than the 2017-2018 crop, which is heading toward its end, according to analysts interviewed by Ag?ncia CMA. Although projections still depend on the February and March rains, the specialists bet on a 2%-5% increase in sugarcane crush, with ethanol claiming 58% of the production mix.
Analysts point that ethanol is easy to produce and to transport and will probably be more profitable this year. During the past year, the international price of sugar plunged to as low as US$ 0.13 per pound in New York as the market deficit turned into a surplus.
Ethanol, in turn, also suffered in 2017, especially with the end of a tax break to fuel producers in Brazil, which decreased prices and margins for producers.
“For the farmer, ethanol is better. It manufactures faster, sells faster and collects faster. Also, he can produce at the beginning of the week and sell on Wednesday, being paid on the following day”, said Mauricio Muruci, an analyst at Safras & Mercado.
The Brazilian consumption of hydrous ethanol increased by 6.47% in 2017. However, in the last three months of the year, it rose sharply: 15% in October, 33% in November, and 31% in December. According to analysts, this recent trend should repeat itself in 2018, with another year for producers to increase earnings.
Muruci also explains that the ethanol predominance in the 2018-19 crop will require Brent oil prices to continue rising and a foreign exchange rate close to R$ 3.25 per dollar, helping to keep gasoline expensive for local consumers.
The sugar price should also remain between US$ 0.13 and US$ 0.1450 per pound, with the break-even point at US$ 0.14 per pound. Because it has had an overproduction on a global scale, sugar prices will probably remain at this level, according to analysts.
“Ethanol can pay at least 20% more than domestic sugar – the benchmark of the Ribeir?o Preto market – and 40% more than the sugar market in New York,” said Muruci.
“The European Union is producing more sugar, and Asia and India are going to produce 27 million tons, from 21 million tons of sugar in the previous crop,” he said.