Ethanol Latin America

Brazil ethanol prices were firming up in early November, rising by 3%  on average in the first week of the month, as the country's key sugarcane harvest in the centre-south region was drawing to an end.

The centre-south accounts for 90% of Brazil ethanol production. The sugarcane harvest in the area runs from April to November-December.

The end of the harvest was lending support to anhydrous ethanol, helping erase some of the losses in the price of the product during the last three months.

Anhydrous ethanol prices were assessed at Brazilian real (R) 1,190-1,220/cbm ($2.21-2.27/gal) in the first week of November, down by 7% from R1,280-1,310/cbm in mid August.

However, hydrous ethanol was assessed at R1,230-1,250/cbm, virtually flat compared with R1,230-1,240/cbm three months earlier.

Brazil uses hydrous ethanol as a standalone fuel in flexible-fuel vehicles (FFVs), competing directly with gasoline, while anhydrous ethanol is blended in gasoline at a mandated 20%.

The price increase in early November was driven by expectation of tighter supply as market sources said ethanol demand in Brazil remained sluggish and spot market activity was thin.

But the outlook for December points to potentially firmer prices, as December tends to be the month with the strongest fuel demand in Brazil because of holiday travel.

Updated to mid-November 2012