End of June Brazilian ethanol inventories surge 42% on year: ministry

Santos — Brazilian ethanol stocks added up to 5.96 billion liters at the end of June, a surge of 42% or 1.76 billion liters on the year, according to the latest data from the Ministry of Agriculture and Livestock.

The total was the highest on record for any end of June since S&P Global Platts started to track such data in 2010.

Despite a record for inventory for any end of June, stocks were just 124 million liters above the same point in 2018, indicating that the supply and demand picture might be starting to show a similar pattern to that of the 2018-19 crop period.

Of the total, some 65.98% or 3.93 billion liters was hydrous ethanol, which is used in Brazil as a standalone biofuel E100, and the balance — 2.02 billion liters — was anhydrous ethanol, used at a mandatory blending rate of 27% in Brazilian gasoline.

In the key producing region of Center-South Brazil, ethanol stocks totaled 5.83 billion liters, a year-on-year increase of 40.5%. Hydrous ethanol accounted for 66.25% of that total, with inventories reaching 3.86 billion liters, a surge of 58.7% on the year. While the numbers still showed a year-on-year surge, the percentage increase has been on the slide each month. On April 15, hydrous ethanol stocks in the region were up 121.8% on the year.

Anhydrous ethanol stocks in Center-South Brazil totaled 1.97 billion liters at the end of June, up 14.7% on year, but 5.74% below the same point in 2018, when anhydrous ethanol stocks totaled 2.08 billion liters, the record for the period. As gasoline consumption in May eased by an average of 19.1% in the Center-South region, hydrous ethanol demand fell nearly 30.6%, leaving anhydrous ethanol demand less affected.

In comparison, at the end of June 2019, both hydrous and anhydrous ethanol stocks were showing a year-on-year drop of 34.4% and 17.8%, respectively, due to steady demand and lower production at the beginning of the crop year, which was hampered by wet weather conditions in the key producing region.

Total ethanol production in Center-South Brazil from April 1 through July 1 added up to 10 billion liters, a drop of 6.61% on the year, while ethanol sales reported by regional producers in the same period fell 25%, according to the latest data from industry association UNICA

As fuel demand is starting to recover in the main Brazilian cities, which are lifting quarantine measures imposed to counteract the spread of the coronavirus pandemic, market participants are starting to indicate some concerns regarding the availability of anhydrous ethanol.

In the week that ended July 10, producers from Goias State were mostly absent from the market, arguing there was no anhydrous ethanol available to seek in the spot market.

S&P Global Platts assessed anhydrous ethanol ex-mill Ribeirao Preto at Real 1,950/cu m July 13, up Real 10/cu m on the week, but down 3.7% year on year.