The volume of hydrous ethanol traded by mills in the Central-South in Brazil during the 2019/20 season, which started officially on April 1, is at a record level. Still, hydrous average prices collected by Cepea are 1.5% higher compared to those verified in the same period of the last crop, in real terms. This scenario is attributed to the advantage of the biofuel compared to gasoline at pumps in São Paulo, which has been keeping the demand for the hydrous ethanol firm since the beginning of the 2019/20 crop.
According to data from Unica (Brazilian Sugarcane Industry Association), sales of hydrous ethanol in the first four months of this season in the Central-South Brazil totaled 7.67 billion liters, 25% higher compared to that registered in the period from April to July 2018 (6.12 billion liters) and a record.
Evaluating the partial of the last 20 crops (from April to July), the price average for anhydrous ethanol in the 2019/20 season is the eighth highest. The highest averages were registered in 2006/07 and 2011/12, of 2.3073 and 2.5203 BRL per liter, respectively. As for hydrous ethanol, the average in the current crop is among the six highest ones.
ANP (National Agency of Petroleum, Natural Gas and Biofuels) data indicate that the average exchange ratio was at 64.5% from April 1 to mid-August 2019, at pumps in São Paulo, close to the 63.9% registered in the same period last crop. This scenario is also verified in other important producing states, namely Goiás (where the advantage of ethanol on gasoline is 64.1%), Mato Grosso (56.5%), Minas Gerais (64%) and Paraná (69.3%).
In order to meet this increasing demand, mills from the Central-South have been focusing on both production and sales of hydrous ethanol. Because of that, Cepea data indicate an 11% decrease in the volume of anhydrous traded in the spot market from April to July/19. The production of corn ethanol may increase to meet the firm demand – new investments have been made, with perspectives to create employment and revenue, in Goiás and Mato Grosso.
Now, the 2019/20 sugarcane season is heading to the second half in the Central-South and it is slightly delayed because of rains registered in April, official beginning of crushing activities.
Players are now focused on other variables, such as oil prices in the international market, the exchange rate, gasoline prices and the political-economic situation in Brazil, which may affect the decision-making of agents.
Still, prices are likely to be more remunerating to producers, which may favor new investments in both agricultural and industrial areas, even to meet RenovaBio purposes, which comes into force in early 2020.