Mills seems to have sacrificed industrial efficiency during the 2H of July, pushing daily hydrous production to levels seen last season;
Is this a consequence of the run against time due to frost or we will see this same behaviour going forward?
If efficiency concerns are out the window, then sugar production in CS is looking at another downside.

Summary Table

Reaching Levels of Last Season

Due to the frost registered in July, mills had to push their crushing pace in order to process the cane affected and minimize the losses;
With a higher crush pace, flexibility would be limited (if efficiency was something to preserve) and sugar mix was thought not to come significantly lower than last season;
Up to this point the daily hydrous output had not reached or surpassed levels seen last crop – mills were being careful with efficiency;

However, hydrous prices began to rise due to demand and, as a result, the arbitrage against sugar started to widen significantly – around 220pts;
With such financial incentives, the mills sacrificed industry efficiency in order to be able to capture current prices;
If this is perpetuated in the upcoming fortnights, there is a downside risk to the production mix for the season that could approach 34% rather than our current 34.7% estimate;
Assuming the all other variables constant, a sugar mix of 34% would bring CS production down to 25mmt – 500kmt less than our current forecast.

2H of July hydrous sales registered another increase with over 1bi litres in the fortnight;
So far, cumulative hydrous sales are at 7.6bi litres – 1.5 bi litres above yoy;
Consumers continue to respond favourably to hydrous due to price parity;
However, with the significant fall of Brent oil this week, concerns start to arise if (or once) the fall in prices reaches the pumps;

Total corn ethanol production is 83.5% above yoy at 387mi litres;
The majority of the output remains focused on hydrous, with 245mi litres of production until the end of July.