22 October 2009 21:39 [Source: ICIS news]
HOUSTON (ICIS news)--A surge in Brazilian ethanol prices is making the biofuel less competitive against gasoline and will likely slow down demand for the product in the coming weeks, sugarcane industry association Unica said on Thursday.
Hydrous ethanol was at or near the price of gasoline in about 35% of the Brazilian market, taking into account an estimated 30% mileage loss incurred from the biofuel, the association said.
Brazil uses hydrous ethanol to power its growing flexible-fuel vehicle (FFV) fleet, which can on gasoline or stand-alone ethanol.
But ethanol demand in the FFV market tends to drop when the biofuel competes neck and neck with gasoline.
Unica expected to see weaker demand for hydrous ethanol already in the second half of October, according to its latest crop update.
Brazil's ethanol production from April to mid-October fell by 3.1% to 17.9bn litres (4.7bn gal) from a year earlier, pressured by continued rainfall in the centre-south region, the association said in its update.
The centre-south accounts for 90% of Brazil’s ethanol output.
Heavy rainfall can disrupt ethanol supply by keeping workers off sugarcane fields and reducing the amount of sugar mills are able to extract from sugarcane.
Unica said precipitation in October was lower than in September, when the centre-south was drenched by around 180 mm (7.1 inches) of rain, nearly three times a 40-year average of 65 mm for the month.
According to the association, sugarcane processing in first half of October totalled 35.2m tonnes, rising by 18.1% from the second half of September, while jumping by 22.6% from the same period of 2008.
Despite the increase, the amount of recoverable sugars obtained per tonne of sugarcane in 1-15 October fell by 9.7% compared with the year-earlier weeks, Unica said.
Recoverable sugars are a key measure for sugarcane yields. Unica attributed the drop to the wet weather.
Centre-south mills crushed 412.7m tonnes of sugarcane from April to 15 October.
The figure represented an 8.9% increase from a year earlier, but Unica said recoverable sugars fell by 5.8% during the same period.
Unica expects centre-south ethanol output to drop by 5% in 2009 to 23.75bn litres.
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