13 September 2011 14:57 [Source: ICIS news]
HOUSTON (ICIS)--Brazilian ethanol prices were steady in the first week of September on thin trade and softening demand, research group CEPEA said on Tuesday.
CEPEA assessed anhydrous ethanol at Brazilian reais (R) 1.3997/litre ($3.08/gal), up by 0.3% from R1.3962/litre in the week ending on 2 September.
Hydrous ethanol was assessed at R1.2205/litre, down by 0.3% from R1.2236/litre a week earlier, the research group said.
CEPEA prices are ex-tank and do not include taxes.
Market activity in Brazil was thin last week because of a national holiday, but CEPEA also cited softer ethanol demand as another reason for the slowdown in the spot market.
Ethanol demand in Brazil has weakened because tight supply has pushed ethanol prices up, making the product lose market share to gasoline.
Brazil uses hydrous ethanol as a stand-alone fuel in flexible-fuel vehicles (FFVs), competing directly with gasoline, while anhydrous ethanol is blended in gasoline at a mandated 25%.
Brazil will reduce its ethanol blend requirement in gasoline to 20% on 1 October to partly offset a drop in ethanol production in the country's key centre-south sugarcane region.
Centre-south ethanol production fell by 18.6% during the past six months on the back of an 11% reduction in sugarcane output, according to data from industry group Unica this week.
Ethanol output for 1 April–1 September totalled 13.77bn litres, down from 16.92bn litres in the comparable 2010 months.
Unica has blamed the reduction on adverse weather conditions for sugarcane crop development.
The sugarcane harvest in the centre-south, which accounts for 90% of Brazil's ethanol production, runs from April to November/December.
($1 = R1.72)
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