Domestic sales of hydrous ethanol in Brazil's Center-South region in October surged to 1.5 billion liters, up 22% from a year ago and up 8% from September, according to the latest data from industry association UNICA.
That is the highest level since September 2015 when sales totaled 1.7 billion liters.
Hydrous fuel ethanol is used in Brazil as a standalone biofuel (E100) for flex-fuel vehicles. To be more competitive than gasoline in Brazil, E100 has to be sold below 70% of the price of gasoline at the pump.
The rise in sales is a response to repeated transport-fuel price revisions made by state oil company Petrobras under a new policy begun in July, as it seeks to better-align its prices with market rates. The changes have led to an accumulated rise in gasoline prices of 21% (July 4-November 14), giving hydrous prices more room to increase and still remain competitive at the pump.
In October alone, adjustments to the ex-refinery gasoline price led to an accumulated rise of 7% for that month. At the same time, ex-mill hydrous prices assessed by S&P Global Platts increased 6%.
On Monday, Platts assessed ex-mill hydrous at Real 2,080/cu m -- the highest level since early February when the CS region was in its intercrop period.
The rise in prices has made ethanol production more profitable than sugar output, shifting the pattern of the 2017-18 sugarcane season, with producers increasing production rates and thus diverting more cane towards the biofuel than initially expected.
UNICA data showed that 57.15% of cane was diverted to ethanol production in the second half of October, well above last year's 50.71% and also higher than first-half October's 56.24%, reflecting the premium for ethanol over sugar.
The recovering production rates for ethanol remain below year-ago levels, but the gap is much smaller than earlier this season, when it was in the double digits.
Hydrous production in the 2017-18 season, which started April 1 in the Center-South, was down 2.2% on the year at 12.8 billion liters through November 1, according to UNICA data. The total volume includes a small volume of ethanol from feedstock corn. Accumulated sales of hydrous to the domestic market are still down on the year at 8.6 billion liters, an 8% decline.
UNICA's domestic sales data includes industrial ethanol, but the vast majority of sales reflects ethanol destined for the fuel market.
