Ethanol Consumption Anima New Crop 2019/20

Ethanol Consumption Anima New Crop 2019/20

Prof. Dr. Marcos Fava Neves

In This monthly analysis follow the main figures and reflections both for the short, medium and long term of the sugarcane agro-industrial chain from the March facts summary. 

For Sugarcane, crop estimates come out. We’re going to them: according to the Sucden, the next harvest should be 564,550,000 tons and will be Produced 27,160,000 tons of sugar and 28.55 billion liters of Ethanol. The Current, according to the company, should close in 572,690,000 tons and production of 26,570,000 tons of sugar and 30.1 billion liters of Ethanol. Agroconsult estimates the grinding of 2019/20 in 575 million tons (0.8% more), with 63% destined for ethanol with this we will produce 28.7 billion Litres (6% less) and 28.8 million tons of sugar (9% more).

By Datagro, it will be ground 583 million In the Mid-South in the 2019/20 crop and, compared with the current crop (570 million), we will only have 2.3% more. Productivity should grow by 2% and, In this Sugarcane, 38.8% will be destined for sugar, producing 29.7 million tonnes (three Million above the current). In ethanol, they estimate 30.2 billion liters (1.15 billion From maize). With This, we would lose 2.7 billion liters in relation to Current crop.

Copersucar will be between 580 and 590 million tonnes, in a mix between 36 and 38% for Production between 26 and 28 million tonnes. Ethanol, Production will be between 30 and 31 billion liters. Finally, for Rabobank, the 2019/20 crop should be Between 560 and 570 million tons of sugarcane producing something between 28 and 29 million tonnes of sugar.

With this Third #AgroDiario of the estimate of the harvest by the March analysis, we noticed variations Between 564 and 590 million tons, from several companies, showing the Overall little growth compared to the crop that ended. This is the message Main.  

In the reflections of the facts And sugar numbers we have that Rabobank estimates Global deficit of 4.3 million tons in the 2019/20 crop, with a drop in the Indian production, mainly (about 2.2 million smaller). For the end of 2018/19 crop is estimated a surplus of 1.1 million t. Estimates prices between 11.5 cents per pound-weight at 14 cents. Consumption in this Crop should grow 1.4% and stocks at the end should be close to 39% of the Consumption needs. By S&P Global Platts the deficit in the world crop 2019/20 (from October to September) will be 1,930,000 tons. And The 2018/19 crop will have surplus of 5.55 million tonnes. For Sucden We will have a global deficit 4 million tons of sugar in the next harvest.

In article in Value, Eduardo Leão brings interesting numbers and contributions on the issue of World sugar market. Brazil owns practically 25% of the production of sugar and 50% of participation in the transacted. USA, Europe and China, which consume about 45 million tons, buy only 20% of its Needs, because they have a lot of support to produce locally (tariffs for Import giants and quotas), even at higher costs. Competitors from Brazil Exports also support the producer and Subsiam exports, and the main Examples are India and Thailand. According to the ONE, only India’s support took US $1.3 billion of our producers. Leo recommends that the public sector Continue to enter into WTO panels, defending trade and our Competitiveness and, for the private sector, recommends stimulating the entry of the Ethanol in these countries, cooperating with the development of this alternative.

Continues Brazil requesting China to open the sugar market in 3 million To prevent us from being in the WTO against it. The Safeguard comes From the beginning of 2017, where 15% of the fare is charged at a quota of 1,950,000 of tons but what goes on from this was to 95%. We Lost a lot of market in China where we have reached more than 50% of the total imported, and this loss was More than 2 million tons/year thanks to this.

CEPEA closed The average price analysis received in the 2018/2019 crop, which ended on 31 March. In the case of crystal sugar, the average price received was R $62,57/SACA 50kg, 7.75% lower value.

We had a month of very little novelty In this market, walked aside the price, but at least continue the prospects That in the next cycle prices improve because they are converging deficits to 4 Millions of tonnes in the next crop and all eyes on the mix of Brazil.

In the reflections of the Facts and figures of ethanol and energy… My fans placed in the previous analyses It worked! According to the ANP, 1.73 billion liters of hydrated were sold to the Posts in February, record for the month and 38% higher than the same month in 1018.

This year, we are 37% above 2018. UNICA Data show that in the first fortnight of March Were sold 824,120,000 liters of ethanol hydrated by the mills, Number 23.5% higher than the same fortnight last year. Counting from 1 April 2018, 20 billion liters of moisturised were sold, 35.6% more. The anhydrous fell 10.4%, and 8.1 billion liters were sold. Exports Increased 4.3%, reaching 1.518 billion liters. UNICA also computes that the Corn ethanol production grew 52% in the period, reaching 745,050,000 of Liters.

Interesting that Ethanol prices have risen in the pumps, following the 11% increase in the Gasoline, but were not accompanied by climbups in the Mills, on the contrary, Fell by 12% in the month, with the moisturised reaching the edge of R $1.70 in the SP plants. According to the ANP, in only 4 states ethanol was below 70%: São Paulo, Minas Gerais, Mato Grosso and Goiás. We Need to understand why in the MS and In the PR, large producer states, is not advantageous.

In the medium term, recent BCG research (Boston Consulting Group) made for Plural, points out that it is necessary to Investments of R $82 billion in both production and infrastructure for Meet the demand for fuels in 10 years. Of These, about R $38.5 billion for biofuel production. The study considered a growth of 2.5% Year to Brazil. It also Points to the need for tax simplification and In the fight against evasion, estimated at about R $5 billion. Of This, Plural believes that R $3.8 billion is in ethanol and 80% in São Paulo and even from 5 to 20% of the fuel is tamed. In Addition to standardizing ICMS and simplification, Lower concentration in the production and refining of fuels is recommended.

It is Believed that something between 60 and 70% of of Renewabio greenhouse gas emission reduction targets, which begin to In 2020, will be made by BR (Petrobras), Raizen (Cosan and Shell) and Ipiranga (Ultra Group) that will have the credits generated by the producers (data from Green Domus Consultancy to Valor).

About corn ethanol, UNITE believes That the production of the Midwest can supply the needs of the Northeast with Improvements in logistics, competing with American ethanol. The investment would be On the road linking the producing region to the river port of Miritituba, Pará. They Entered Brazil, coming from the USA, almost 500 million gallons in 2018. We Must produce 1.4 billion liters of corn ethanol in 2019, against the 840 Million produced in 2018 and the good second corn crop this year, which will To help produce this ethanol.

On the trail of Opinion of the UNITE, FS Bioenergia (belonging to the Summit/USA Group and Tapajós/Brazil) declared that it will invest R $1 billion in Nova Mutum to assemble The third ethanol plant. Already has one in Sorriso (MT) being built (ends next year) and another in Lucas do Rio Verde, practically already doubled. Their expansion plans involve two more mills, probably in Spring Of the East and New Field of the Parecis. According to Valor, the new unit will crush 1.3 million tons of corn each year and produce 530 million liters of Ethanol, 340,000 tonnes of DDG (Distillers Dried Grains) and 17000 tonnes of oil.

Study of the USDA showed that the emissions of corn ethanol in the USA are 43% lower than the Of gasoline if refineries are fed with natural gas. This should give More stimulus to allow 15% anhydrous mixture in American gasoline Throughout the year, including in summer, where it is not allowed and consumption is Greater.

Ending… What would be my Strategy based on the facts? What to look at now in April: it Should continue a large consumption of hydrated ethanol, and can edge the 1.8-1.9 billion liters in these Two months, well above that of 2018. With this, we will quickly drop the Remaining stocks and began to Crop with better prospects. With the rise of oil and gasoline in March (between 10 to 15%), we can start the harvest with ethanol prices more Sustained and mix going to the fuel, with this, will help to get more Market sugar and contribute to pushing sugar prices upwards. The That can’t happen now at the entrance of the crop is the price drop at the plant by the Known cash needs and not falling into the bomb, a fact that repeats since That I follow the market, hinting the increased consumption of moisturised. Who Can, my recommendation is to not sell products now. I bet on prices Better if oil maintains this level because the consumption of hydrated should Come strong and we have little more cane in comparison with the previous crop.

Marcos Fava Neves is Professor Holder (part-time) of USP’s Faculties of Administration in Ribeirão Preto Preto and FGV in São Paulo, a specialist in strategic planning of the Agribusiness. Check out texts, videos and other materials on the website

Analysis and Market

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