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Americas Ethanol

Tight supply fuels rally in Brazilian ethanol prices

Brazilian ethanol prices soared at the end of last week, with the market remaining concerned about tight supply as the intercrop season fast approaches. Brazilian hydrous ethanol BMF forward prices climbed over 3% DoD last Thursday ahead of UNICA’s data release on sugar and ethanol consumption and production. This saw prices on a FOB Santos basis soar, with anhydrous ethanol now priced at 735USD/m3, and B-grade at 650USD/m3 according to PRIMA data. This hike in Brazilian ethanol prices has stumped buying interest from international markets, while also creating even more export opportunities for US ethanol exporters to feed Brazilian demand.  So far this harvest season through September, Brazilian ethanol imports have reached 335,048m3, 31% higher than in the same period last year.

The total amount of sugarcane crushed in Brazil in September reached just under 160mn t, down 4% MoM although 14% more than crushing in September 2015. So far this year, total sugarcane crushed has reached 947mn t, up 8% YoY. 54% of sugarcane crushed this season has gone to ethanol production, down from 58% last year, with the amount of ethanol being recoverable from a ton of cane falling 7.7% YoY to 41.95l/ton.

Brazilian hydrous ethanol production fell 9% MoM in September to 3.78mn m3, 12% lower than production in September 2015. This saw cumulative hydrous ethanol production so far this harvest season fall 8% YoY, sitting at 23.22mn m3. Meanwhile, Brazilian anhydrous ethanol production fell just 2% MoM in September, and still remains 8% higher than this time last year. Cummulative anhydrous ethanol production so far this season is pegged 11% higher than this time last year, mainly due to a strong start to the harvest season.

Meanwhile, domestic fuel consumption in Brazil dipped lower in September, with hydrous ethanol sales falling 3% MoM and anhydrous ethanol sales dipping 9% MoM. While hydrous ethanol demand so far this harvest season has fallen from the record highs seen last year, down 12% YoY, total anhydrous ethanol consumption so far this season has climbed 2% YoY. According to ANP data, blended gasoline has been the more affordable fuel at the pump for the past three weeks for flexi fuel drivers, which should see hydrous ethanol demand continue to weaken and could boost gasoline and anhydrous ethanol consumption.

NB 17/10/2016

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