Brazilian anhydrous ethanol stocks as of July 1 stood at 1.59 billion liters, down 3% from same period last year, data from the Agriculture Ministry showed.
The total volume includes ethanol for fuel and industrial usage. Almost 100% of Brazilian ethanol is produced from cane feedstock.
Anhydrous stocks have declined due to lower output rates so far this season alongside higher consumption. Surging imports from the US have helped to offset the stock shortage.
Hydrous stocks, by contrast, rose 2% on the year to nearly 1.96 billion liters as of July 1, reflecting reduced demand at the pump.
The 2017-18 sugarcane season started April 1 in the key Center-South region, the largest sugarcane- and sugar-producing region in the world. Anhydrous production so far this season totaled 3.2 billion liters as of July 1, down nearly 6% on year, while hydrous output was 4.39 billion liters, down 20% on the year, data industry association UNICA showed.
The North-Northeast region also produces ethanol from sugarcane, but most of the states in that region are in the intercrop period and little ethanol has been produced.
Anhydrous production has been favored rather than hydrous, due to the lower demand for the latter in the domestic market. This translates into higher demand for hydrous' competitor gasoline, into which anhydrous is blended at a 27% ratio by government mandate.
Hydrous is used in flex-fuel vehicles, which allow drivers to choose which fuel they want at the pump. Hydrous is competitive when its price is at most 70% of the price of gasoline, due to hydrous' lower energy content.
With the season heading to its peak in July-September, stocks will grow and are expected to reach their highest level in October-November. Last year, stocks peaked November 16 at 4.36 billion liters.
On the demand side, anhydrous sales to the domestic market in the first five months of the year were up 6% on the year at 5.04 billion liters, the most recent data from the National Petroleum Agency (ANP) showed.
Hydrous demand, by contrast, was down 20% year on year at 4.79 billion liters.
