Brazilian cane mills have accelerated reopenings from seasonal downtime even faster than expected, despite amid a drop in prices of their key products, ethanol and sugar.
Mills in Brazil’s Centre South, which is responsible for some 90% of domestic sugar output, crushed 5.26m tonnes of cane in the first half of this month – up from just 292,600 tonnes a year before, industry group Unica said.
The rise reflected an increase to 75 in the number of mills open during the period – above the 70 that Unica forecast early in March, and well in excess of the 20 running in the first half of March last year.
And the industry group forecast a further 45 mills having started up by the end of the month.
While the crushing season does not start until the start of April, and would not be expected to get into its stride until May, mills have been encouraged to reopen early from seasonal breaks by prices which have hit record highs this year, boosted by the weakness of the real.
The drop in the currency boosts the value, in local terms, of assets priced internationally in dollars.
Mills also have considerable volumes of cane left unharvested from last season, thanks to rain delays.
Prices drop
The rapid start to the season comes despite a drop in prices of both sugar and ethanol in the Brazilian market, a decline encouraged by the prospect of the crushing season, but also by a sharp recovery in the real.
Prices of crystal sugar in Sao Paulo have fallen back nearly 10% from a record high two months ago of R$84.74 per 50 kilogramme bag to stand at R$76.52 per bag on Tuesday, according to research institute Cepea.
For hydrous ethanol, prices have dropped 5.5% to R$1.7985 per litre from a record high set two weeks ago.
With the prospect of the start of next season, “we have observed a decrease in ethanol prices”, Unica said, adding that supplies of anhydrous ethanol were “much higher than expected”.
However, it signalled that the drop in values may stimulate demand, noting that the decline in prices was “raising the competitiveness of the biofuel compared to gasoline”.
Output growth
The extra cane was turned in the main – 70.5% – into ethanol, of which output soared eightfold.
Output of hydrous ethanol received a further boost from the conversion of some supplies of anhydrous ethanol, the type blended with gasoline.
While only 29.5% of cane was allocated to making sugar, this was higher than the 9.2% a year before, helping production of the sweetener soar to 139,900 tonnes from 2,600 tonnes a year before.
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