Center-South Brazil anhydrous ethanol inventories at the lowest in five years: ministry

Santos — Anhydrous ethanol inventories in Center-South Brazil totaled 3.17 billion liters by Sept. 15, down 0.3% from the prior year, and at the lowest volume for any mid-September since 2015, Ministry of Agriculture and Livestock data showed.

Looking to the North-Northeast region, the anhydrous stocks in mid-September surged 34.8% year on year to 102 million liters. The opposite movement is explained by the beginning of the NNE crop 2020-21 in mid-August, when producers from Paraiba state started to produce the biofuel.

Anhydrous ethanol is used in a mandatory blend of 27% in the Brazilian gasoline C, therefore, biofuel demand is correlated with fossil fuel sales in the country.

Brazilian flex-fuel drivers in 2020 showed different consumption behavior than the prior year, and despite the most competitive price for hydrous ethanol since April, most have favored gasoline consumption.

While E100 cumulative sales from January through August was at 12.04 billion liters, shrinking 16.9% on year, gasoline C sales added 22.37 billion liters, down 10.4% from year-ago levels, reflecting the smaller decline in demand for anhydrous.

In contrast, hydrous inventories have surged since the beginning of the CS 2020-21 crop and totaled 7.23 billion liters by Sept. 15, up 20.3% on year and at the highest record inventory for any mid-September.

In the NNE Brazil, where producers started the crop favoring sugar and anhydrous production, hydrous stocks in mid-September reached 76 million liters, plunging 20.5% on year.

The spot market has been reflecting that drop in the Brazilian anhydrous inventories, and in both CS and NNE regions, anhydrous prices has been spiking in the last weeks.

S&P Global Platts assessed anhydrous DAP Suape on Oct. 2 at Real 2,645/cu m, the highest historical NNE anhydrous price, while Platts anhydrous ex-mill Ribeirao Preto was assessed on Oct. 5 at Real 2,300/cu m, up 8.75% on year and at a 16.20% premium to hydrous ethanol after excluding taxes.

According to market sources, the average premium settled for the term contract in the 2020-21 crop was at 11%, in line with the historical average, however the higher gasoline demand than initially forecast by distributors and the drop in anhydrous production has been supporting the spot premiums.