BRAZIL DATA: Ethanol output surges to record high in May

Rio de Janeiro — Brazilian ethanol production hit the highest level ever recorded in May amid expectations for a record sugarcane harvest and biodiesel output rebounded from coronavirus-related lows, according to data released June 29 by the National Petroleum Agency, or ANP.

Sugar mills produced 8.46 billion liters of ethanol in May, more than double the 4.05 billion liters produced in May 2019, the ANP said. That was the highest output recorded by the ANP since its inception in 2000. May's ethanol production also more than doubled the 3.87 billion liters produced in April, the ANP data showed. The jump was driven by the accelerating sugarcane crush, which got off to a bit of a late start because of poor weather and social-distancing measures implemented in mid-March.

The surge in ethanol production came despite Brazil's ongoing battle against the coronavirus pandemic, with the death and infection rate in Latin America's most-populous country still trending higher. While several major metropolitan areas such as Rio de Janeiro and Sao Paulo started to ease restrictions, the outbreak has spread to less-populated areas where it's proving hard to contain. That could mean additional volatility in domestic consumption and production as local authorities adapt to the outbreak, industry officials say.

Brazil's economy is expected to contract 6.54% in 2020, down from initial expectations for annual growth of about 3.5% at the start of the year, according to the Brazilian Central Bank's latest survey of analysts and economists. Brazil's biofuels and refined-product consumption, especially gasoline and diesel, typically tracks GDP performance.

Gasoline sold at the pump contains 27% anhydrous ethanol, while hydrous ethanol can be used directly in tanks of flex-fuel vehicles. Diesel sold at the pump, meanwhile, contains 12% biodiesel. That means coronavirus-related uncertainties, such as a second wave of infections, could further undermine domestic biofuels consumption and output in the second half of 2020, officials say.

The surge in ethanol production also came despite growing coronavirus infections in the rural and remote growing regions of Sao Paulo state, which has been hit hard by the pandemic. Sao Paulo leads Brazil in coronavirus infections and deaths.

Brazil produced 7.39 billion liters of hydrous ethanol in May, more than double the 2.80 billion liters produced in April 2019 and the 3.26 billion liters produced in April, the ANP said.

Anhydrous ethanol output, meanwhile, slid 13.7% to 1.08 billion liters in May compared with 1.25 billion liters in May 2019, the ANP said. May's anhydrous ethanol production, however, advanced 74.8% from April's 616 million liters, the ANP said.

BIODIESEL BOUNCE

Biodiesel production, meanwhile, bounced back from a coronavirus-related downturn in April, when output was curtailed amid expectations for dramatically reduced diesel consumption caused by social-distancing measures. The ANP briefly suspended a biodiesel supply auction and allowed distributors to reduce delivery commitments, then was forced to hold an emergency biodiesel supply auction in June amid concerns about shortages.

The ANP temporarily reduced the biodiesel blend to 10% from 12% for five days in June amid higher-than-expected diesel demand. The 12% biodiesel blend in diesel sold at the pump went into effect March 1. Despite the supply concerns, the ANP and Mines and Energy Ministry said in a statement June 28 that Brazilian biodiesel producers were capable of meeting demand for the fuel under the 12% mandate.

"The ministry and ANP have accompanied the growth in diesel demand caused by the restart of economic activity on a daily basis via a focused dialogue with fuel distributors, biodiesel producers and Petrobras," the two agencies said in a joint statement.

Brazil plans to raise the biodiesel mandate to 15% by March 2023 in annual 1-percentage-point increases.

Each 1% increase in the biodiesel-diesel blend sold at the pump represents about 600 million liters of additional production per year, according to the Brazilian Biodiesel and Biokerosene Union, or Ubrabio, and Brazilian Vegetable Oil Industry Association, or Abiove. The two trade groups represent biodiesel producers in Brazil.

Abiove expected Brazil to produce about 7 billion liters of biodiesel in 2020, while Ubrabio forecast growth to 6.9 billion liters. The forecasts, however, were made before the full effect of the global coronavirus outbreak was known.

Brazil produced 479.1 million liters of biodiesel in May, an increase of 6.9% from 448.4 million liters in May 2019, the ANP said. May's biodiesel output also rose 9.4% from April's output of 438.1 million liters, the ANP said.