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Center-South Brazil H1 September cane crush falls 10.9% from H2 August: UNICA

Brazil sees largest hydrous ethanol stocks draw in almost four years

Sao Paulo — Brazil's hydrous ethanol stocks as of February 1 were 2.19 billion liters,down almost 25% compared with two weeks earlier and 5% lower than a yearearlier, data from the country's agriculture ministry showed.

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The draw over the two-week period totaled 725 million liters and was thelargest two-week decline since late February 2014, when over 1 billion literswas withdrawn from storage.

The decline came as consumption rates have surged in recent months and as thekey Center-South region, the largest sugarcane- and sugar-producing region inthe world, entered its intercrop season.

Hydrous ethanol sales by Center-South mills domestically in January totaled arecord 1.36 billion liters, up 51.77% year on year, data from industryassociation UNICA showed.

On a cumulative basis, between the start of the 2017-18 season on April 1,2017 and the end of January, domestic sales of hydrous ethanol by Center-Southmills have increased 4% compared with the year-ago period to 12.9 billionliters.

At the same time, hydrous ethanol production in the Center-South regionduring the current season totaled 14.72 billion liters, up 1.85% year on year.Production of the biofuel caught up in the latter months of 2017 asremuneration became more profitable than for sugar, prompting producers toswitch more of the sugarcane mix.

S&P Global Platts assessed hydrous ethanol in raw sugar equivalence at 17.51cents/lb on Friday, up 4.13 cents/lb or $91.05/mt, above the sugar No. 11 ICEfutures market settlement. In Brazil, hydrous ethanol competes with gasoline for drivers at the pump. Thebiofuel price must be below 70% of the gasoline to be seen as competitive. Hydrous ethanol prices in Brazil gained a major boost during 2017 aftergasoline prices rose, leading to the current record price levels. In July2017, state-owned oil company Petrobras started to revise its ex-refinerygasoline prices daily to follow international market fluctuations. That led eventually to higher gasoline values, which in turn boosted theceiling for hydrous prices while keeping ethanol competitive. Hydrous ethanol prices in Brazil's Center-South climbed in January toReal 2,280/cu m, the highest level since Platts started assessing it in April2014, spurred by limited supply during the intercrop period. Platts assessedhydrous ethanol ex-mill Ribeirao Preto at Real 2,250/cu m on Friday, a surgeof 10.84% from a year ago.

--Beatriz Pupo,

--Nicolle Castro, by Keiron Greenhalgh,