It Remains to Cheer for Oil Prices

Left Rooting for Oil Prices

Oil pumps on sunset

Prof. Dr. Marcos Fava Neves

In This monthly analysis Follow the main numbers and reflections for both the short, medium and long The sugarcane agro-industrial chain from the facts of January. 

In the harvest, until the end of January, we have already processed 563,290,000 of tonnes, much less than the same period of the last Harvest (583,830,000 tons). It Was produced 26,360,000 tons of sugar, large Fall on the 35,830,000 of 2017/18. For ethanol, 30.29 were made Billion liters (9.18 billion anhydrous and 21.10 billion hydrated). In The increase is 43.3%.

Although they fell, the St. Martin’s results were good in the first trimester. You really Did it. With this adverse price situation, have a profit before interest, taxes, Depreciation and amortization (EBITDA) of R $417.3 million (Ebitda margin of 49.5%). In the case of Biosev, the EBITDA declined by about 20%, staying at R $471.6 Million, with an Ebitda margin of 38.47%. When you put the weight of the debt, here comes The damage. The operating result of the companies is good, the problem… The debt.

According to BP, the consumption of Renewable energies should grow 175% up to 2040, around 4.5% per year. It’s A Good rate, but lower than that of the period 1995 to 2017, when it was just above 7.5%. The projection of the company is that in 2040 of all liquid fuels Consumed in Brazil, about 22% will be biofuels.

Rains returned well to the Center-South this month, and should help in recovering the sugarcane, but not Should change the 570 million of expected tonnes in the 2019/20 crop.

Regarding the reflections of the facts and numbers of sugar, finally The fall in sugar prices is reflected in lower production stimulus. In Europe The difficulties are enormous and exports must fall a lot. According to the Company Cristal Union, between 10 and 20 industrial units will close in Europe and Other crops may occupy the beet space. Better late than never.

It is Expected That production in India falls due to drought that has reduced part of planting. There’s Already Estimates below 30 million tons of sugar in cicl0 2018/19 against The record of 32.5 million tons in 2017/18 and exports in the House of Nearly 3 million tons. India subsidies are Estimated to harm The Brazilian plants in about US $1.5 billion per year, and Brazil finally Should denounce in the WTO contesting support for products and export subsidies.

The Advantage that ethanol Had in relation to the sugar fell a lot. Datagro already predicts we’re going to do 28.8 million tonnes of sugar at 2019-2020 in the South-Central, almost 9% above the Previous crop. Even So, the company believes in a deficit of 3,050,000 In the current crop (October to September) and 8,940,000 tonnes in 2019-2020.

Sugar Sales Brazilian in 2018 had the following participations: firstly the Alvean with 3,450,000 tons (22% less) and 18.6% of the total exported, Wilmar with 3.3 million tons and 17.9% of the total, Sucden with 2.9 million of (15.6%), Dreyfus with 1.5 million tons (7.9%) The fifth was the Copa Shipping (1.4 million tons and 7.4%) And the sixth was the Nolis, 1.15 million tons and 6.2% of the total).

Sugar by CEPEA is in R $69 The sack of 50 kilos of the crystal, increase of 0.38% in the month. In the NEW York Stock Exchange Running around the 13 cents/pound weight, with a tendency to stability In the next two months until some facts listed above are more Clear.

Regarding the reflections of the facts and figures of ethanol and energy, according to the National Petroleum Agency (ANP), the Brazil in 2018 consumed 0.03% more, a total of 136.1 billion liters. The Highlighted was the diesel, which grew 1.6% reaching 55.6 billion liters and the Ethanol, which grew 42.1%, to 19.4 billion liters, reaching 14.2% of the Total consumed by the entire fleet. Gasoline consumption fell 13.1%, to 38.3 billion liters for replacing ethanol. In 2018 The consumption of the Otto cycle Fell by 3% on equivalent gasoline. Only in one year the fleet Flex consumed 6 billion liters more. The average parity of the year was 66% and In the Otto cycle was conquered 46% of total consumption.

Since the beginning of the harvest we have sold 25.69 billion liters (18.06 billion hydrated and 7.63 billion anhydrous). Represents 35% more. According to UNICA, in the second fortnight of January the Ethanol sales by the Mills were 960 million liters, 32.3% more than The same period of the previous year. In the sum of the month were 1.83 billion liters, 32.4% higher. Managed to surpass December by 2.16%.

In January, it was produced 100 million liters of corn ethanol. According to CONAB the consumption of maize in Brazil in the 2018/19 harvest should increase 4.4% by reaching 62.5 million of Tons, partly by the demand of ethanol plants.

In early February the Prices of the hydrated pump were on average R $2,592/L, representing 64% of the Price of gasoline and an average price about 10% less than February 2018. At The plants the price is about 14% lower than that of the same period of the year Past. On January 15, stocks were 4.5 billion liters in the Mills, about 70% above last year. This stock should be consumed up to The beginning of the harvest. However, because they are high, they have dropped the prices of moisturised For R $1.55 in plants and anhydrous at R $1.73/L. We Have to cheer for the oil. Global Platts believes that oil Return to the $70/barrel by the end of the year despite the recent fall.

Ending… What would be the My strategy based on the facts? What to observe Now in February/March: Cheering for a consumption Large of hydrated ethanol in February and March to help bring down the Stocks and start the crop with better prospects. As the prices of the Oil are stable and the gasoline must remain at this price, the consumption Moisturiser should be strong. The FCStone Believes that today ethanol is at a price of 14.39 dollars per pound-weight of the Sugar. We Have to follow: climate, consumption, oil, gasoline, foreign exchange and Evolution of stocks this month of March. I believe in improvement.

Marcos Fava Neves is a full Professor (part-time) of the Faculty of Administration of USP in Ribeirão Preto and FGV in São Paulo, Specialist in strategic planning of agribusiness. Check out texts, videos and other materials on the website

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