Brazil hydrous ethanol price rebounds after five-week slide
The price of hydrous ethanol in Sao Paulo, Brazil's biggest fuel market, snapped a five-week slide in the week ended April 9 due to stronger demand following the Easter break, agricultural think tank Cepea said Tuesday.
Hydrous ethanol, the 100% biofuel used directly into flex-fuel vehicles, rose nearly 1% to Reais 1.2142/liter ($2.38/gallon) compared to the previous reporting week, Cepea said.
Excessive rain in the country's center-south region, which hosts most of Brazil's sugar and ethanol mills, forced a slowdown in sugarcane crushing rates, lending support to higher pricing, Cepea added.
Above-average rainfall is likely to disrupt sugarcane harvesting in the second quarter, according to weather specialist Somar Meteorologia. Brazil's center-south farmers are forecast to harvest upwards of 585 million mt of sugar in the season ending March 30, 2014, up from the 532.3 million mt in the previous season, according to consultancy Datagro.
Anhydrous ethanol, the one blended at a 20% rate into conventional gasoline, remained virtually stable at Reais 1.3351/liter from Reais 1.3368/liter in the previous week, according to Cepea. The anhydrous ethanol mandatory blending rate will increase to 25% in May.
Both hydrous and anhydrous ethanol are currently generating better returns for Brazilian sugarcane millers than raw sugar, Deutsche Bank said in its Commodities Quarterly report Tuesday.
Hydrous ethanol's sugar-equivalent price is pegged by the bank at $0.184/lb. Anhydrous ethanol is estimated at $0.1959/lb.
Raw sugar for May delivery closed at $0.1770/lb at the New York ICE futures exchange Wednesday, after touching two two-and-half year lows last week.
Deutsche Bank also said that a widely anticipated reduction in Brazil's PIS/COFINS tax on a basket of commodities will likely increase hydrous ethanol economics, prompting producers to maximize output of the biofuels.