Brazil Center-South hydrous ethanol price expected to climb

The Brazil Center-South hydrous ethanol price increased Real 75/cu m for the week ending Feb. 14 because a few large distributors reentered the market needing to restock to cover demand for the remainder of February.

S&P Global Platts assessed hydrous ethanol ex-mill Ribeirao Preto at Real 3,480/cu m on Feb. 14, up 2.2% on the week, but still down 13% for 2022.

"Demand for hydrous ethanol should increase in the near term because the hydrous ethanol price ratio to gasoline is approaching 70%, which should cause many consumers to favor hydrous ethanol over gasoline at the pump," said a Sao Paulo-based trader.

Southeast hydrous ethanol price ratio to gasoline drops

Southeast hydrous ethanol price ratio to gasoline declined to 71% in the week ended Feb. 12, from 73%, National Petroleum and Biofuel Agency data showed. It was still above the 70% threshold that discourages demand from consumers for hydrous ethanol, or E100, because of its lower energy content.

The absolute price differential between gasoline and hydrous ethanol at the majority of gas stations in Brazil's Center-South was Real 1.924/liter Feb. 12, above the Real 1/liter mark, which typically encourages demand from consumers.

Consumers with flex-fuel vehicles can opt for E100 or gasoline, which has a blend of 27.5% anhydrous ethanol.

Although the Southeast hydrous ethanol price ratio to gasoline was above 70%, a price differential of Real 1.924/liter between gasoline and E100 will encourage consumers to favor less expensive hydrous ethanol when considering savings of around Real 96, while refilling an average tank size.

Ethanol sales in January

Ethanol sales by mills in CS Brazil during January were 1.76 billion liters, 32.4% lower year on year, with 1.71 billion liters going to the domestic market and 52.26 million liters for exports, data from Brazilian sugarcane industry group UNICA showed Feb. 15.

The volume of hydrous ethanol sold to the domestic market during October was 919.9 million liters, down 44.6% on the year. The quantity of anhydrous ethanol sold to the domestic market during October was 794.8 million liters, 2% lower on the year.

Since the beginning of the 2021-22 harvest, cumulative sales of ethanol in the region totaled 16.9 billion liters, or a decrease of 5.1%, from the same period last year.

Although Brazilian producers had taken advantage of the recent ethanol production premium as recently as November, long-term expectations are for mills to maximize their sugar production, due to increased sugar production profitability over ethanol.

The ICE March NY11 sugar futures contract averaged a 1.77-cent premium to hydrous ethanol in raw sugar equivalent for the week ended Feb. 14.