Hydrous fuel ethanol demand in Brazil was 1 billion liters in March, down 11% on year but up 16% from February and the highest level since December, data from the National Petroleum Agency (ANP) showed Wednesday.
Demand was last higher when it reached 1.14 billion liters in December, the data showed.
March usually is a month of higher consumption, when school holidays end and some of the sugarcane mills in the Center-South return to operation after the intercrop period such that ethanol supply increases.
The Center-South region accounted for 93% of total demand, or 936.6 million liters, while the balance was consumed in the North-Northeast region.
Hydrous fuel ethanol is used in flex-fuel vehicles and competes with gasoline at the pump, where it is competitive when its price is at most 70% of the gasoline price. Gasoline has 30% more energy content than its competitor hydrous.
Brazilian hydrous prices averaged 74.4% of gasoline prices in March, compared with 76.8% the month before, ANP data showed.
Cumulative hydrous demand in the first quarter of the year was 2.75 billion liters, down 20% on the year, ANP data showed.
Hydrous demand has been lower due to tight supply since last year and consequently higher domestic prices, which curb demand at pump. Producers diverted more cane last season to produce sugar rather than hydrous ethanol, due to higher prices for sugar.
Hydrous production in the 2016-17 season (April-March) in the Center-South fell 15% to 14.8 billion liters. In the North-Northeast region, where the season started in October and has not yet ended, cumulative hydrous production through March 1 totaled 669 million liters, down 32% on the year, data from industry association UNICA and from the Agriculture Ministry showed.
Lower hydrous demand translates into higher gasoline demand, which is blended with 27% anhydrous ethanol under a national mandate.
Anhydrous consumption in March was 1.07 billion liters, up 11% from February and up 11% from a year ago, ANP data showed.
Q1 anhydrous demand rose 7% on the year to 3.03 billion liters, the data showed. The Center-South region accounted for 74% of total consumption, while the balance was consumed in the North-Northeast.
With the start of the 2017-18 sugarcane season in Center-South on April 1, ethanol supply has increased and consequently demand is expected to have risen that month.
Kingsman, the agriculture analysis unit of S&P Global Platts, expects that hydrous demand in April reached 1.17 billion liters, up 0.8% on the year, while anhydrous consumption is expected to have declined 1.3% on the year to nearly 952 million liters.
For all of 2017, Kingsman expects Brazilian hydrous demand to drop 8% from the prior year to 13.44 billion liters, with anhydrous demand rising 3% to 11.94 billion liters. On the production side, Kingsman expects total ethanol output (hydrous plus anhydrous) in the 2017-18 season in the Center-South to fall 4.6% to 24.24 billion liters. Brazil also produces ethanol from corn, with output expected to rise to 300 million liters in the 2017-18 season, up from 234 million liters the season before, according to UNICA.
