Ethanol production in Brazil's important center-south region fell 4.2% in the first half of May from the same period of 2013 as fewer mills are grinding sugar cane, according to data released Tuesday by cane-grower's trade group Unica.
Sugar mills produced 1.58 billion liters of the biofuel in the May 1-15 period, down from 1.65 billion liters in the same period last year, Unica said.
"The number of mills processing cane this year continues to be below what was seen in 2013, undermining growth of the cane crush," said Antonio de Padua Rodrigues, technical director at Unica. Some mills are facing financial difficulties and have not yet started harvesting, he added.
Through May 15, a total of 249 mills were operating compared with 268 mills at the same time last year. Some 29 mills started harvesting during the first 15 days of May.
In the first half of May, 889.7 million liters of hydrous ethanol were produced, down 9.8% from 986.8 million liters in the year-ago period. But anhydrous ethanol output was 695.1 million liters, an increase of 4.3% compared with the 666.6 million liters produced a year earlier.
Anhydrous ethanol demand has soared since last year, when Brazil's government increased the volume of anhydrous ethanol mixed with gasoline at the pump to 25% from 20% in May 2013. Unica officials have said the government is considering a potential increase of the anhydrous ethanol-gasoline mixture to 27.5% in July, but the government has not yet confirmed the move.
Hydrous ethanol should also see a boost in consumer demand as prices begin to fall, Padua Rodrigues said.
"In the past two weeks, the use of hydrous ethanol has become economically advantageous in Sao Paulo state when compared with gasoline," he said. Sao Paulo is Brazil's most-populous state and the country's industrial heartland.
Ethanol can be a better deal for drivers of flex-fuel cars, which operate on ethanol, gasoline or any mixture of the two fuels, when the price of the biofuel is about 70% of the price of gasoline.
"This year, the decline in prices has been a little slower," Padua Rodrigues said. "We expect that in coming weeks, consumers will see even more attractive prices at the pump that will stimulate biofuel consumption."
ETHANOL OUTPUT SLIGHTLY BEHIND YEAR-EARLIER HARVEST
Mills have produced a total of 3.22 billion liters of ethanol since the start of the April 2014/March 2015 harvest through May 15, Unica said. That was down 1.7% from the same period of the 2013/14 harvest.
Production of hydrous ethanol was 2 billion liters, a decrease of 9.5% from the previous harvest, while output of anhydrous ethanol was up 14.4% at 1.2 billion liters.
Sugar-cane mills in Brazil's center-south region allocated 57.5% of the crush to ethanol production in the first half of May, while 42.5% was directed toward sugar output. Global sugar prices have been depressed because of a glut of the sweetener, making ethanol production more attractive to local cane growers.
An average of 60.5% of the cane harvest has been directed toward producing biofuels since the start of the market year in March through May 15, Unica said. That was higher than the 58.4% share in the same period of the 2013/14 harvest.
Sugar production continued to decelerate in the first half of May, Unica data showed. Sugar mills had ramped up sweetener output at the start of the harvest year to meet supply commitments after wet weather affected sugar output during the 2013/14 harvest.
Sweetener output in the first 15 days of May was 1.91 million mt, a decrease of 8.4% compared with the 2.1 million mt producing during the same period of 2013. Total sugar production during the 2014/15 harvest is down 9.9% at 3.41 million mt, according to Unica's figures.
Mills crushed a total of 38.8 million mt of sugar cane in the first half of May, bringing the accumulated total this market year to 79.3 million mt. That was down 3.4% from the volume of cane crushed during the 2013/14 harvest.
Yields for the cane crushed so far this season are mixed, with liters of ethanol per mt of cane up 1.8% at 40.61 liters/mt of cane but yield of sweetener falling 6.7% to 42.97 kg/mt of cane.
