HOUSTON (ICIS)--Brazilian ethanol prices were slightly lower on Tuesday compared with a week earlier in part because demand remains lacklustre despite recent steady though relatively small ethanol price declines, market sources said.
It was the third consecutive weekly decline of ethanol prices in Brazil.
Hydrous ethanol prices were assessed at reais (R) 1,350-1,380/cubic metre ($2.24-$2.29/gal), down R20 from the previous week in the low end and down R10 in the high end of the range. Anhydrous ethanol prices were assessed at R 1,330-1,350/cubic metre as they showed a similar downward movement.
Relatively few transactions were being closed so far this week as demand has failed to increase despite the weaker prices and also as supply remains stable with relatively fewer units making ethanol volumes available to the market, sources said.
In the Sao Paulo region, the parity of hydrous ethanol compared with gasoline is at around 65% but even under these conditions drivers have not fully switched to ethanol, sources said.
Drivers would normally switch to ethanol when hydrous ethanol prices are less than 70% those of the gasoline mix at service stations. Brazilian drivers consider gasoline as a more efficient fuel and normally buy hydrous ethanol only when the biofuel sells at a discount to gasoline and the 70% parity is usually considered the level at which drivers would make the switch.
The gasoline mix sold in Brazil contains 25% anhydrous ethanol, as mandated by law.
Meteorologists cited by sources do not forecast rain until at least near the end of August in the centre-south region of Brazil which is the country's most important sugar cane production region. Sugar cane is the raw material for ethanol production in Brazil.
A lack of rains normally helps producers in part as it does not disrupt harvest-crush operations. But the country sugar industry association Unica has shown concern in recent months that without rains their collection efforts could advance too fast leaving little material to be collected near the end of the season.
Rains have been scarce this year even before the harvest crush season officially started 1 April. The season will end in November/December.