Brazil ethanol higher as Carnival nears

HOUSTON (ICIS)–Brazil ethanol prices are expected to keep the upward trend that surfaced by the end of last week amid renewed buying interest from distributors ahead of the Carnival holidays, sources said on Monday.

Hydrous ethanol ended last week with prices traded around Brazilian reais (R) 2.12/litre ($2/gal), a source said. Hydrous deals ranged from R2.15-2.20 this week, according to another source.

“The expectation  is that prices at R2.15 will become effective this week due to the increased demand caused by the influence of Carnival and the impact of the disclosure of UNICA numbers,” the second source said.

Anhydrous ethanol prices ended last week steady at R2.09-2.10/litre.

“Anhydrous should be at a level of R2.10/litre, on an upward trend due to the need of product to meet demand in the north and northeast of Brazil,” the source said.

“We realise that the prices of hydrous ethanol at the pumps will begin to reach a parity greater than 75%, which is what we wanted, because if we did that we could not curb consumption,” a source said.

“We believe that for now consumers will begin to choose to use gasoline,” the source added.

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

But FFV drivers in Brazil usually choose gasoline over ethanol even when the two fuels cost about the same, causing demand for the biofuel to weaken.

Hydrous ethanol becomes more competitive when its price is at or below 70% of the price of gasoline. At this level, drivers tend to switch from gasoline to ethanol.

The centre-south accounts for 90% of Brazil’s ethanol production.

($1 = R3.98)

(IMAGE SOURCE: ZUMA/REX Shutterstock)