Despite the higher production, demand underpins prices in SP in the 2019/20 crop

Cepea, January 7, 2020 – Prices of hydrous ethanol were driven by demand in the 2019/20 season. With record volumes produced month after month, consumption increased gradually throughout the season, influenced by the advantage of the biofuel compared to gasoline at pumps.


In the partial of the season (from April to November 2019), sales of hydrous ethanol in central-southern Brazil totaled 15.8 billion liters, 13.7% up compared to that in the same period of 2018 (13.9 billion liters), according to data from Unica (Brazilian Sugarcane Industry Association).


Still according to Unica, high demand increased the allocation of sugarcane to sugar production from 64.8% (last season) to 65.4% this season (up to November), the highest in the last 17 crops. As a result, from early April to November 30, 2019, 31.7 billion liters of ethanol (hydrous and anhydrous) were produced in Brazil, 8.6% more compared to that in the same period of the crop before. It is important to mention that the production of corn ethanol doubled from April to November 2019 compared to that in the same period last year, totaling 889.8 million liters.


In spite of that, prices in 2019/20 were higher than in the season before. Taking into account the monthly CEPEA/ESALQ Indexes for hydrous ethanol, the average was 1.7528 BRL per liter in the 2019/20 crop (until November), against 1.70 BRL per liter in the same period last season, a real increase of 3.13% (values were deflated by the IGP-M November/19). The Index for anhydrous ethanol, in turn, rose 2.17% in the same comparison, in real terms, averaging 1.9225 BRL per liter.


Evaluating the partial of the last 20 crops, averages in 2019/20 of anhydrous and hydrous ethanol were among the six highest ones. As regards anhydrous ethanol, the highest averages in that period were registered in 2011/12 and in 2000/01, at 2.3520 BRL per liter and 2.2563 BRL per liter, respectively. As for hydrous ethanol, the highest average until then, at 1.9031 BRL per liter, was registered in 2011/12.


Concerning trades in 2019, higher volumes were traded from September onwards, to meet the demand from the retail market. In October and November, quotes rose significantly, given that distributors anticipated trades for December needs.


Data from Cepea indicate that, in the accumulated of the 2019/20 season, the volume of hydrous ethanol sold by mills in São Paulo was 14.9% higher than that in the same period last crop. In the last week of November (Nov. 25-29), the amount traded was the third largest in Cepea series, which started in 2002.


At the beginning of the 2019/20 season, prices were oscillating, influenced by the domestic and international scenarios. In the second half of the crop, high demand led to firm prices. In some periods, mills had cash flow needs and/or had to make room in storage tanks, which pressed down quotes.




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