Main points
- As expected, the rise in sugar prices had a positive impact on the June ATR value.
- The outlook for sugar remains positive, and should continue to provide support for the ATR price this season.
- The curve update has seen little change since last month, and we continue with a projection above BRL1.26 kg/ATR for March 2024.
Sugar rises 300 points in the formula for June
The calculation of the ATR price (which impacts end cane price in Brazil) involves a basket of products derived from sugarcane and their respective values, according to the methodology applied by Consecana, and the biggest weight is precisely the raw sugar.
For the ATR calculated for June, a weighting of the May (K) and July (N) contracts is applied referring to the average of the 3 months prior to expiry – for more details, access our explainer.
And precisely in this period, we saw the price of No.11 (NY raw sugar) remain above 25c/lb. The result was an increase of 13% in relation to the price considered in May.
Estimates Maintain Expected Record for March 2024
The current estimate points to a cumulative price of BRL1.2679/kg ATR in March 2024, slightly above our last projection. The forecast can be seen in the Sugarcane Prices panel Centro Sul Brasil.
And the projection for March 2024 could have been even higher, if not for the bearish outlook for ethanol…
Fuel Taxation Continues With More Surprises
Source: ANP
This year alone, we have already had 4 tax changes on gasoline and ethanol. Let’s recap:
- Partial return of federal taxes in March.
- Unified state ICMS tax on gasoline in June.
- Full return of federal taxes in July.
- Increase of ICMS tax on ethanol in SP to 12% in July.
The total return of federal taxes and the increase in state ICMS tax increased the price of ethanol at gas stations, reducing its competitiveness – that is, the ethanol/gasoline parity. For biofuel to gain market share again, the price at the mills would have to fall.
Since the announcement of the ICMS tax increase, the daily hydrous ethanol index has dropped by almost 7%.
Source: Esalq
Another factor also contributed to this drop. Along with the full return of federal, Petrobras announced a 5% reduction in the price of gasoline at the refinery. The measure clearly aims to reduce the impact of the increase for the final consumer. Without this reduction, the consumer could face the price of gasoline returning close to BRL5.6/liter (SP average) – a level not seen since July last year.
