Brazil Ethanol Prices Won’t Climb as Mills Close

Ethanol prices in Brazil won’t surpass this year’s record highs after mills shut down for the annual interharvest season because the country is increasing imports, according to a researcher with Centro de Estudos Avancados em Economia Aplicada.

Brazil may import as much as 1.2 billion liters (317 million gallons) of ethanol this year, according to the sugar cane industry trade group Uniao da Industria de Cana-de-Acucar.

That will keep prices from surging, Mirian Bacchi, an analyst at the Piracicaba-based research institute, said today in a telephone interview. Bad weather has led to a smaller harvest this year, prompting concerns that fuel prices will climb when mills shut down for the rainy season that runs from December to April.

“We’re buying lots more ethanol from abroad now,” Bacchi said. “Prices won’t go up much further.”

Ethanol futures for delivery at the end of April are trading at 1.38 reais (79 cents) on the BM&F Bovespa exchange in Sao Paulo, indicating that the market doesn’t expect prices of the fuel to vary much over the next six months, she said.

Anhydrous ethanol, which is mixed with gasoline, was being sold at the mill at the same price for the week ended Nov. 4, according to Cepea data.

“High prices” for ethanol “throughout the year have pushed drivers onto gasoline,” so supplies aren’t as low now, she said. Many cars in Brazil can run on either ethanol or gasoline.

On April 15, prices of anhydrous ethanol reached a record high of 2.47 reais a liter, according to information compiled by Bloomberg.

Lower Blend Rate

A government move to cut the ratio or ethanol blended with regular gasoline, from 25 percent to 20 percent “will also help keep prices low” in Brazil, she said.

The lower blend rate means Brazil will use about 136 million liters less anhydrous ethanol by April, based on last year’s gasoline consumption figures, according to Salim Morsy, an analyst at Bloomberg New Energy Finance’s New York office.

Prices for anhydrous ethanol have climbed 44 percent to an average 1.51 reais a liter in October since the start of the sugar cane season, Cepea said in a statement yesterday. That’s about 29 percent higher than the average price last October, according to Cepea data.

Brazil’s Center South region will produce 20.4 billion liters of ethanol this harvest, less than the 25.4 billion liters produced during the last harvest, the Sao Paulo-based sugar cane trade group Uniao da Industria de Cana-de-Acucar said Nov. 1.

source: businessweek