Opinion Focus
- Lower crush in the first half of June with 38mmt.
- Sugar mix continues to rise.
- Still, sugar production is behind by 2.2mmt yoy.
1H Jun 2022 Production Figures
Downside Risk
- Even though crush in the 1H of June was higher than last year at 38.6mmt, the cumulative for the season so far is 13% below yoy.
- With more mills starting operations in the upcoming fortnight and increase in the crushing pace, the gap should narrow as the crop progresses.
- However, we believe it might be difficult to make a significant recovery against the previous cycle.
- Agricultural productivity in April and May were lower than 2021/22 – as was expected.
- We believe that from July onwards, agricultural productivity should improve because the sugarcane that will be crushed from next month onwards was benefited with a healthier volume of rainfall throughout its development than the 2021/22 sugarcane – but still was below ideal.
- However, with the beginning of the dry period and risk of frost (winter), recovery is limited.
- The productivity curve, despite being above the previous cycle, should be one of the lowest in the last decade.
- We have reduced our crush projection from 551mmt to 545.5mmt.
Changes on ICMS
- The changes in fuel taxes were approved and implemented last week.
- What it is not clear yet is whether the PEC for ethanol will be approved and guarantee the competitiveness of biofuel.
- Additionally, uncertainties continue to trouble Petrobras with, yet another president replaced and rumours of freezing gasoline prices.
- Even though the harvest started more ethanol oriented, the environment for the biofuel remains uncertain and the sugar mix should continue to rise over the next fortnights.
- So far, CS Brazil has produced 7.2mmt down 24% yoy.
- We remain with our 32mmt sugar production forecast for the season.
Lower Ethanol Sales
- Regardless of the parity reaching 67% in the first half of June, the fuel has not recovered market share.
- And with the recent changes of fuels ICMS, unless the PEC for ethanol (which must be voted on today) is approved, consumer preference could turn even more to gasoline.
- Anhydrous sales also declined in the past fortnight.
- This behavior seems to reflect a slowing down of the Otto cycle (fuel demand) as a whole.
Other opinions that may be of your interest:
- Taxes Fall, But Gasoline Prices Rise
- What is the Impact of an ICMS readjustment for Ethanol
- Updates Consecana São Paulo – June 9, 2022
- Points of Attention on the Readjustment of Fuel Prices in Brazil
Explainers that may be of your interest:
