Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.

  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list

Brazilian ethanol looks for balance between oil, sugar markets

Agriculture | Biofuels

COVID-19, weather conditions, market fundamentals leave corn markets in turmoil

Agriculture | Biofuels

Platts Biofuelscan

Commodities | Agriculture | Biofuels | Oil

Geneva Biofuels Conference

Natural Gas | Oil | Crude Oil | Jet Fuel | Petrochemicals

Factbox: Asian fuel suppliers desperate to get rid of excess supplies

Brazilian ethanol looks for balance between oil, sugar markets

Sao Paulo — Brazilian ethanol prices, production and consumption patterns are more than ever driven by oil and gasoline prices.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Ethanol's share of the 2018-19 sugar cane crop is expected by analysts to near 65%,its highest level in almost 10 years.

In 2018, Brazil tried to maximize production of the biofuel from cane, mainly converting it into hydrous ethanol.

But what has driven this swing to ethanol from use of the cane for making sugar?

The big turning point for Brazilian producers was in July 2017, when state-led oil company Petrobras initiated a new pricing policy for both diesel and gasoline. The revised pricing model established that gasoline and diesel prices would be adjusted based on foreign-exchange rates and international prices for crude and refined petroleum products.

The hydrous ethanol price at the pump in the southeast of the country averaged Real 2.815/liter (77 cents/liter) in 2018, up 8.52% from 2017, while its direct competitor gasoline C surged 18.68% year on year in the region, according to data from the National Petroleum Agency (ANP), which made hydrous ethanol the preferred fuel.


But a combination of lower global sugar production and geopolitical uncertainties pressuring oil and gasoline prices is unfavorable for ethanol demand and production going forward.

As a result, Brazil is expected to slightly increase the amount of cane it devotes to sugar production.

S&P Global Platts Analytics calculations show sugar is expected to provide a better return than ethanol from April onward, encouraging producers to increase sugar's share of the cane crop.

Hydrous ethanol in raw sugar equivalent paid 13.21 cents/lb on Thursday, according to S&P Global Platts assessments, only 0.56 cents/lb above the current price of sugar, which shows hydrous ethanol is still paying more than sugar but not with the same premium as was seen at the same point a year ago, when hydrous ethanol was priced around 4.47 cents/lb above sugar.

The forward price curve of the NYMEX sugar No.11 futures contract is closely watched by Brazilian producers, who compare it with the estimates for oil and gasoline prices to construct their commercial strategies for the year ahead.


Biofuelscan covers the latest worldwide biofuel news and prices and provides a daily summary of market events. Use the request a free trial link and we will send you 5 issues free for your review.

Free Trial

On the demand side, Petrobras has been reflecting lower international gasoline prices in its ex-refinery prices, however consumers have yet to see it reflected fully at the pump. In the last quarter of 2018, gasoline ex-refinery prices plunged 37.47%, while the Southeast and Northeast region saw a price decrease of just 7% at the pump.

The decisions of fuel distributors in 2019 will be a key influence on hydrous ethanol's price relationship with gasoline.

In addition, Brazilian producers are expected to increase their risk exposure by lowering the volume of sugar settled under long-term contracts in the 2019-20 crop. This allows them the flexibility to make last-minute decisions on how much of the production mix goes to ethanol or sugar.


Platts Analytics' estimates for the 2019-20 Center-South Brazil season have been recently revised to forecast a lower ethanol share at 62.50%, down from a 64.60% estimate for the current season.

Meantime, dry weather in December and January is posing questions about cane availability and some downside is possible. The dry weather during the 2018-19 cycle is also expected to result in a lower sucrose content (ATR).

For ethanol, this means that the 2019-20 estimate for output is currently 28.81 billion liters, down 4% from the current season.

Platts Analytics sees Otto cycle consumption recovering sharply in 2019, rising almost 5% from 2018 in the light of better economic prospects.

In 2018, a national truck strike was one bearish factor for demand.

But the Brazilian Central Bank is forecasting economic growth of 2.4% in 2019, compared with 1.3% in 2018.

Equally important is that Brazil's flex fuel car fleet is continuing to grow, with sales up 12.5% in 2018. However, hydrous ethanol is expected to lose some of its recently attained share of total fuel consumption, slipping to 24% in 2019 from 26% forecast for 2018. In comparison, hydrous ethanol's share of total Otto cycle demand was 17% in 2017.

Brazil will continue to need to import ethanol and should remain a net importer of fuel ethanol for a third consecutive year.

Platts Analytics' estimates ethanol imports will slide 5% to around 1.6 billion liters in 2019 from expectations of 1.72 billion liters in 2018. As usual, the majority of the volume is expected to land in the NNE region. The lower expected imports are a reflection of production favoring anhydrous ethanol in the upcoming 2019/2020 season.


In 2018, the Brazilian North and Northeast regions found themselves in a new situation, with a favorable price for hydrous ethanol compared with gasoline.

As a result, a big change was seen in drivers' consumption patterns, with an year-on-year increase of 84% in hydrous ethanol consumption in the first 11 months of 2018, ANP data show.

Platts Analytics estimates' for the 2018-19 NNE Brazil season - October 1 through September 30 - have been recently revised, increasing the volume of cane diverted toward ethanol production by 3.45 percentage points to 56%.

In this scenario, sugarcane production is estimated at 47 million mt, compared with 44.87 million mt in the previous 2017/18 crop cycle, ATR was estimated at 133 kg/mt, a surge of almost 5 kg/mt from the last crop. This combination of more cane and producers diverting it toward ethanol production means total ethanol production of 1.97 billion liters is expected, an increase of 135 million liters compared with the 2017-18 crop.

Anhydrous ethanol stocks in the North-Northeast region continue to be much lower than a year ago at 150 million liters at the end of December, a 27% year-on-year decrease and a record low for that point in the year.

The decrease is a response to local mills favoring hydrous ethanol output in the 2018-19 season in response to high demand.

Hydrous stocks in the NNE region at the end of December totaled 213 million liters, up 65% year on year and the highest for the period since 2011-12.

Lower anhydrous ethanol production was positive from a regional pricing perspective.

Regional producers were not in a rush to sell material and did not decrease their prices to attract demand.

During the majority of the NNE crop period, ethanol producers were pricing anhydrous at the breakeven point of its hydrous equivalent, and in many circumstances were not even offering anhydrous ethanol in the spot market due to their move toward hydrous production.

Any shortfall of supply in the region was often met by imports from the US.

Platts' anhydrous ethanol assessment DAP Suape averaged at Real 2,101.66/cu m between November 10 and January 24, up 3.20% year on year.

The structural change means that for first time since 2010-11, NNE producers are focusing mainly on hydrous production and as such, since the start of the 2018-19 season, hydrous ethanol production in the region is up 87% year on year at 1.2 billion liters.

In contrast, regional anhydrous ethanol production is down 19% year on year.

Total ethanol output for the region is now up to 1.9 billion liters, up 28% from 1.5 billion liters in the same period last year. This figure is already 6% higher than total amount ethanol produced during the whole 2017-18 season.

Currently, ethanol's share of the cane crops stands at 59.47%, compared with 54% in the previous season, and a record high for the period.

For 2019, even with gasoline prices getting cheaper at the pumps, hydrous ethanol demand is expected to remain higher than previously, as regional drivers are expected to keep favoring the biofuel as the nominal price difference between the two road fuels is expected to remain more than Real 1.00/liter.

One issue in NNE Brazil being watched closely is the expiration of the current 20% import tariff on volumes over 150 million liters per quarter.

The tariff was implemented in September 2017 for two years, which means it is due to expire in September 2019.

With President Jair Bolsonaro's chief economic adviser, Paulo Guedes, being a University of Chicago trained free-market economist, sources anticipate the market should not expect any increases in trade barriers. In fact, the industry may have to push to maintain the current tariffs in an effort to protect their domestic market share from a net long US ethanol market eager to increase its exports.

-- Nicolle Monteiro de Castro,

-- Beatriz Pupo,

-- Edited by Keiron Greenhalgh,