While Brazilian sugarcane crushing so far this harvest season has climbed 10% YoY according to UNICA, ethanol production has failed to keep pace, as the rally in global sugar prices pushes mills across the country to opt for more profitable sugar production which has now soared 22% YoY. Although ethanol production benefited from an early start to the 2016/17 harvest season, anhydrous ethanol production fell 3% MoM in the first half of August, with hydrous ethanol production increasing only 4%. On average in Brazil so far this harvest season, 55.6% of sugarcane crushed has gone into sugar production compared to 59.5% in the same period last year.
Domestic anhydrous ethanol sales fell by just over 3% MoM in the first half of August, as flexi-fuel drivers across the country opted for more cost effective hydrous ethanol over blended gasoline. Hydrous ethanol has remained the more attractive fuel for drivers since the end of April, although a 3% YoY drop in total fuel consumption since the beginning of 2016 has seen hydrous ethanol sales dip 14% YoY so far this year. Hydrous ethanol sales across Brazil for the first half of August reached 714,490m3, 6.5% higher than this time last month, but still falling short of the record levels seen last year.
Meanwhile, Brazilian ethanol exports have continued to suffer from logistical issues at ports, with large volumes of diesel imports continuing to take up most of the storage space and limiting availability for ethanol. Soaring sugar prices have also pushed Brazilian ethanol prices higher, pricing it out of the Californian LCFS market and leaving it priced well above US corn based ethanol. No shipments have been seen booked to move Brazilian ethanol to Asia or the US through the month of September, while US producers have benefited from exporting US ethanol to northeast Brazil to feed the 27.5% blending mandate with gasoline applicable nationwide.