Rain in Brazil's key Center-South region is frustrating sugar mills who had plans for an early start to the cane harvest, helping to spur domestic hydrous ethanol prices to a fresh high.
S&P Global Platts on Tuesday assessed hydrous ethanol ex-mill Ribeirao Preto at Real 2,320/cu m ($771.40/cu m), up Real 20 from Monday, reaching the highest level since the assessment was launched in April 2014.
Current prices had sparked hope among several producers of kicking off harvesting and crushing the new 2018-19 Center-South crop before the official start date of April 1.
However, rainy weather -- which is common at this time of the year -- has been hampering the ability of most producers to begin their harvests. Dry weather is needed so the cane is in the best condition for crushing.
"New crop ethanol is still very restricted," said one broker, citing persistent summer rain across the region.
The weather forecast indicates wet conditions will persist throughout the rest of March.
"Quick summer storms are still being seen in the sugarcane belt in March. These are not heavy rains, but enough to restrict the harvest," said Desiree Brandt, a meteorologist specialized in agriculture at Sao Paulo-based weather forecaster Somar Meteorologia.
"Only in April will we see longer periods of dry weather," she added.
Platts has seen some trades reported for future delivery, above the usual one to seven days forward period, but volumes have been limited.
"Mills that intended to have new hydrous available on March 15 are being forced to sell that for March 30 delivery, as rains continue to delay the harvest," said another broker. "I see hydrous prices falling only at the end of March or in early April, when the new supply is available."
S&P Global Platts Analytics estimates year-ending hydrous ethanol stocks in Center-South Brazil on March 31, at the end of the 2017-18 season, will be 340,000 cu m, down from 758,000 cu m a year earlier and 538,000 cu m at the end of 2015-16.
Hydrous ethanol consumption in Brazil has been on the increase in the second half of 2017 and in 2018, as the biofuel serves as a cheaper alternative to gasoline, domestic prices of which have been increasing due to international prices, exchange rates and federal taxes added last year.
The estimate for 2017-18 ending stocks does not take into consideration new crop hydrous ethanol produced in March.
Sources said this additional supply would be welcome if it avoids the risk of a hydrous ethanol shortage, which would be more damaging to the ethanol industry than pressure on prices.
"I prefer to see more supply available on the market, despite the fact we may see lower prices, because any shortage would be terrible for our relationship with the customers," said a source at a major sugarcane producer.
