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April showers cause Brazil ethanol prices to rise to new record

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April showers cause Brazil ethanol prices to rise to new record

  • Author
  • Phillip Herring    Nicolle Monteiro de Castro
  • Editor
  • Valarie Jackson
  • Commodity
  • Agriculture

Houston — Hydrous ethanol prices in Brazil's key Center-South region jumped just over 18% over the first 11 days of April to a record high of Real 2,350 ($604.21)/cu m because of heavy rains in the region.

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During the same period, anhydrous ethanol prices have risen 23.51% to a record 2,285/cu m during the same period, from Real 1,850/cu m March 29. The domestic anhydrous ethanol assessment was at a 10.50% premium over hydrous ethanol, net of the ICMS tax, Thursday.

"Today I could not get offers for hydrous or anhydrous ethanol in the Sao Paulo area for immediate withdrawal," one trader stated.

Heavy rains that hampered crushing activity in the Center-South and an increase in Petrobras' average gasoline price for distributors were the most dominant factors affecting this month's trading activity.

"It seems that current hydrous ethanol stocks are very limited, and since there are heavy rains forecasted for the next few days, distributors are aggressively buying ethanol from mills to guarantee they have supply, since there is no way to produce ethanol during heavy rains," a trader said last week. Crushing machines are not able to enter into wet lands and heavy rains also make it extremely difficult to produce ANP-specification anhydrous ethanol given lower water content required in the sugar cane.

Meanwhile, Petrobras' average gasoline price for distributors rose to Real 1.9354/l last Friday, up 5.61% for April. ICE Brent Crude June futures prices have risen about 5% and the NYMEX May RBOB futures prices has risen about 7.95% so far in April and are having an immediate impact on the Petrobras' gasoline pricing mechanism.

Anhydrous ethanol prices have been extremely sensitive to any delays in production due to heavy rains because of the higher costs of producing anhydrous ethanol under wetter conditions as those conditions cause sucrose content in sugarcane to become more diluted. In addition, anhydrous export volumes in March were the highest since 2016 on a combination of lower ethanol prices in Brazil, a weak Real against the US dollar, and high US ethanol prices because of logistics problems related to floods in the Midwest.

S&P Global Platts Analytics estimates total anhydrous stocks in CS Brazil at around 500 million liters at the end of March, the equivalent to 19 days of consumption based on March daily use, but the lowest level since March 2011.

Over the next 10 days, above-average rains are anticipated for five of the six key cane-growing states, with Sao Paulo having the most, at 82% above average. Increased rainfall, which lasted until Wednesday, likely will continue to disrupt the start of harvesting and further dilute sucrose levels. Many of the large groups had planned to start their crushing activities April 8.

During the rest of the week, rainfall in the CS region is predicted to be 19% below average at 14.7 mm according to MDA Weather Services, enabling short-term harvesting activities. But long-term forecasts show heavy rains until April 23, with rains forecasted at 52.5 mm, 14.7% above average, for April 9-23.

"Once the heavy rains subside and harvesting can get underway, prices should return to levels last seen at the end of March," another trader said.

-- Phillip Herring,

-- Nicolle Monteiro de Castro,

-- Edited by Valarie Jackson,