Ethanol prices in Brazil's main center-south producing region fell between September 12 and September 16 as fuel distributors cut purchases on signs of slowing demand, data from Sao Paulo-based research institute CEPEA/ESALQ showed Monday.
Excluding duties, hydrous ethanol sold at mills in the state of Sao Paulo edged 0.7% lower for the second consecutive week to Real 1.2121/liter ($2.66/gal).
High ethanol prices at the pump have caused drivers to switch to gasoline, curtailing demand for ethanol.
According to a price survey conducted by Brazil's biofuel regulator ANP from September 11 through September 17, ethanol was more competitive than gasoline at the pump in only two for the country's 26 federal states.
On average, drivers of flex-fuel cars decide to tank up with either ethanol or gasoline depending on the price at the pump. As flex-fuel cars achieve fewer miles on a liter of ethanol, drivers are better off switching to gasoline when biofuel prices are over 70% those of gasoline.
In the state of Sao Paulo, which accounts for 60% of Brazil's ethanol consumption, the ethanol-gasoline price ratio was 71% last week, ANP said.
"Fuel distributors have seen a drop on ethanol sales for end consumers and therefore decided to cut back on purchases from producing mills. Offers also remained restricted, with only a few mills active in the spot [market]," CEPEA/ESALQ said in a statement on its website.
Ex-duty prices for anhydrous ethanol, used for blending into gasoline, fell 1.1% week-on-week to Real 1.3837/liter, CEPEA/ESALQ said.
A cut in the mandatory ethanol blend rate into gasoline to 20% from 25% by October 1 has been the main factor pressuring prices, industry sources said.
