Rain in Brazil's key Center-South region is frustrating sugar mills whohad plans for an early start to the cane harvest, helping to spur domestichydrous ethanol prices to a fresh high.
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S&P Global Platts on Tuesday assessed hydrous ethanol ex-mill RibeiraoPreto at Real 2,320/cu m ($771.40/cu m), up Real 20 from Monday, reaching thehighest level since the assessment was launched in April 2014.
Current prices had sparked hope among several producers of kicking offharvesting and crushing the new 2018-19 Center-South crop before the officialstart date of April 1.
However, rainy weather -- which is common at this time of the year -- hasbeen hampering the ability of most producers to begin their harvests. Dryweather is needed so the cane is in the best condition for crushing.
"New crop ethanol is still very restricted," said one broker, citingpersistent summer rain across the region.
The weather forecast indicates wet conditions will persist throughout therest of March.
"Quick summer storms are still being seen in the sugarcane belt in March.These are not heavy rains, but enough to restrict the harvest," said DesireeBrandt, a meteorologist specialized in agriculture at Sao Paulo-based weatherforecaster Somar Meteorologia.
"Only in April will we see longer periods of dry weather," she added.
Platts has seen some trades reported for future delivery, above the usualone to seven days forward period, but volumes have been limited.
"Mills that intended to have new hydrous available on March 15 are beingforced to sell that for March 30 delivery, as rains continue to delay theharvest," said another broker. "I see hydrous prices falling only at the endof March or in early April, when the new supply is available."
S&P Global Platts Analytics estimates year-ending hydrous ethanol stocksin Center-South Brazil on March 31, at the end of the 2017-18 season, will be340,000 cu m, down from 758,000 cu m a year earlier and 538,000 cu m at theend of 2015-16.
Hydrous ethanol consumption in Brazil has been on the increase in thesecond half of 2017 and in 2018, as the biofuel serves as a cheaperalternative to gasoline, domestic prices of which have been increasing due tointernational prices, exchange rates and federal taxes added last year.
The estimate for 2017-18 ending stocks does not take into considerationnew crop hydrous ethanol produced in March.
Sources said this additional supply would be welcome if it avoids therisk of a hydrous ethanol shortage, which would be more damaging to theethanol industry than pressure on prices.
"I prefer to see more supply available on the market, despite the fact wemay see lower prices, because any shortage would be terrible for ourrelationship with the customers," said a source at a major sugarcane producer.
--Gustavo Bonato, email@example.com
--Edited by Keiron Greenhalgh, firstname.lastname@example.org