Tight supply and strong demand have boosted the average price for ethanol in Brazil in the current 2011/2012 sugarcane harvest to its highest level in a decade, both in real terms or deflated values, research institute CEPEA/ESALQ said on its website Wednesday. Brazil produces two types of ethanol: anhydrous and hydrous. Anhydrous ethanol is used for mandatory blending into gasoline and hydrous ethanol is used as an alternative to gasoline by drivers of flex-fuel vehicles.
The average price for hydrous ethanol in the Brazil's Sao Paulo state from April through November 2011 was Reals 1.2104 ($0.66)/liter, 30.9% higher than the average for the same period in 2010.
The average price for anhydrous ethanol in the same region is Reals 1.4960/liter, an increase of 39% compared to the same period in the previous season.
Meantime, production volumes of both types of ethanol decreased 20% in April through October 2011 compared to the same period in 2010, which means 2.7 billion liters less ethanol, CEPEA/ESALQ said, citing data from the National Agency of Petroleum, Natural Gas and Biofuels.
Brazil's key center-south region, the lowest-cost sugarcane-producing region in the world, produced 488.46 million mt of sugarcane from April through November 2011, a decrease of 10.23% from the same period last year, according to Brazilian sugarcane trade group UNICA.
So far in the 2011/12 sugarcane harvest season, 20.377 billion liters of ethanol have been produced (7.888 billion liters of anhydrous and 12.489 billion liters of hydrous), according to UNICA, a decrease of 17.7% in comparison to 2010/2011. In this period, 48.36% of the sugarcane was allocated to sugar and 51.64% to ethanol production.
The two commodities -- ethanol and refined sugar -- compete for sugarcane, meaning changes in the sugar market affect the competing ethanol market.
From April through November 2011, refined sugar was 34% more profitable than anhydrous ethanol in Sao Paulo state. For hydrous ethanol, the sugar advantage was 51%.
Comparing the two types of ethanol, anhydrous remunerated, on average, 14% more in the same period, based on price parity calculated by CEPEA.
The consumption of Brazilian ethanol fuel also increased, due to the higher costs of oil and the increased participation of flex-fuel vehicles in the country's passenger vehicle fleet. Also, as demand for gasoline increased, consumption of anhydrous ethanol consequently rose as well.
As a result of the high price levels for hydrous ethanol in Brazil, that fuel ended up losing its cost advantage over "Gasoline C" in most states. Gasoline C is a blend that uses hydrous ethanol in gasoline, rather than anhydrous.
According to data from ANP, from April to October 2011, 20.54 billion liters of Gasoline C were sold in Brazil, 21.82% more than in the same period of 2010. Sales of hydrous, on the other hand, decreased 37% in the same period, totaling only 6 billion liters.
Regarding Brazilian ethanol exports, 1.44 billion liters were shipped between April and November 2011, according to Brazil's Foreign Trade Secretariat, or Secex, for an increase of 7.9% in relation to the same period of 2010.
Brazil imported 564.758 million liters from April through November 2011, CEPEA said in a statement.
