Since the second half of 2023, national sales of hydrous ethanol have followed a stable trend of recovery, after a period of difficulty for business, mainly between mid-2022 and early 2023. ANP figures show that, after the atypical period between 2022 and 2023, hydrous ethanol sales in 2024 once again exceeded the five-year average in November 2023 and are close to the records set in 2019, with monthly sales volumes close to 1.8 million m³.
National sales of hydrous ethanol (million m³)
Source: ANP. Design: StoneX.
The increase in biofuel sales is due to hydrous fuel becoming more competitive at the pumps, made possible by two main factors: the influence of the record 2023/24 crop (Apr-Mar), increasing product availability and, consequently, biofuel stocks even in the inter-crop period, as well as the normalization of the tax context, which underwent changes in June 2022, removing part of the tax incentives for ethanol in federal taxation.
Parity between hydrous and gasoline in the five main consuming states (%)
Source: ANP. Design: StoneX.
With parity at more favorable levels, the share of hydrous ethanol in total light vehicle fuels (Otto cycle) increased significantly in the last quarter of 2023. Since then, until June, consumption has continued to heat up, but the huge increase in the price of hydrous ethanol sold by the mills since January 2024, with the fuel rising from BRL 2.20/liter in January 2024 to levels close to BRL 3.12/liter this Thursday (15) (reference Ribeirão Preto/SP), has led to a slight increase in parity in some of the main consuming regions.
In this context, during the month of June, when ethanol at the pumps began to exceed the psychological mark of BRL 4.00/liter in states such as Minas Gerais and Paraná, the national share of hydrous ethanol fell slightly, from 26.2% in May to 24.4% in June.
National share of hydrous ethanol in the Otto cycle (ethanol + gasoline C)
Source: ANP. Design: StoneX.
Despite the slight reduction in ethanol consumption in June, it is worth noting that the figures for ethanol sales by mills in the Center-South during July, released by UNICA last Tuesday (13), reduce fears of a downward trend in national hydrous consumption, at least in the short term. UNICA indicates that hydrous ethanol outflows to the domestic market in July amounted to 1.81 million m³, 1.7% higher than in June and 48.2% ahead of outflows in the same period in 2023.
As such, despite the recent rise in the value of hydrous ethanol, the readjustment of prices in the biofuel market has still allowed consumption levels to remain significantly above the annual comparison. By the beginning of August, six states and the Federal District had parity below 70%, and the good progress of crushing for the 2024/25 crop has allowed stocks of the biofuel to be well maintained. Despite this, the outlook continues to be that the parity between ethanol and gasoline should start to rise, especially from September onwards, resulting in a slight and gradual reduction in demand via price increases. For more details, visit StoneX's interactive price projection.
Daily recap
The prices of raw and white sugar recorded a day of slight decline on the futures markets on Thursday, once again falling to around US¢ 17/lb for the most liquid contract in New York. The October SBV4 contract ended the day at US¢ 17.88/lb (-0.5%), while white SWV4 finished the day at US$ 513.3/t (-0.41%). The market seems to remain under the influence of the announcement of a high volume of sugarcane crushing in the second half of July 2024, following UNICA's announcement last Tuesday (13). In addition, the market's outlook has been bearish for sugar, with speculators increasing their short positions, which is also related to the prospect of good rains in Southeast Asia, raising expectations for India's production in 2024/25 (Oct-Sept).
