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Brazil's CS ethanol stocks fall 5.9% on year, support historical high prices

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Brazil's CS ethanol stocks fall 5.9% on year, support historical high prices

Sao Paulo — Ethanol inventories in Brazil's Center-South region reached 4.76 billion liters in mid-February, down 18.7% from the end of January and down 5.9% year on year, showed Ministry of Agriculture data published late Monday.

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Stocks of Brazilian standalone biofuel E100 were recorded at 2.71 billion liters, down 7.2% on the year, while anhydrous stocks fell to 2.04 billion liters, a drop of 4.3% from the same period in 2019.

While stocks continued their downtrend in the CS intercrop season – December to March – E100 consumption remained steady in the country's largest fuel-consuming region, supporting the historical high prices for the biofuel.

S&P Global Platts' hydrous ethanol ex-mill Ribeirao Preto assessment averaged Real 2,508/cu m in January, up 27% from the assessment average in January 2019.

Despite the record-high average price for January, hydrous ethanol sales in CS reached 1.7 billion liters in January, an increase of 1.6% on the year and the highest sales volume for any January on record, according to data from the National Petroleum and Biofuel Agency (ANP) on Monday.

In January 2019, producers felt encouraged to lower prices in the peak of the intercrop season as hydrous ethanol inventories were at 2.92 billion liters, up 80% from January 2018, and there was no certainty that demand would remain steady before the next crop season started in April.

The scenario showed that the biofuel consumption was stronger than initially forecast, and the hydrous ethanol price parity below the 70% threshold against gasoline kept sales up in the first quarter of 2019.

In the first quarter of 2020 to date, decreased price volatility has been the main characteristic of the current intercrop season. Producers who carried stocks have learned from the previous crop and have not underestimated either the potential hydrous ethanol demand in an environment of a favorable parity at the Southeast's pumps, or a better economic scenario.

Producers from CS are expected to start harvesting sugarcane in mid-March to guarantee enough ethanol supply at the beginning of the crop. According to weatherman Filipe Pungirum from Climatempo, rainfall in the main producing regions of Ribeirao Preto, Piracicaba and Aracatuba will range from average to slightly below average.