Hydrous ethanol prices at the pump in Sao Paulo state averaged 72% of the gasoline price Nov 8-14 from an average of 68.3% in October and 62.3% in September, while in November 2014 it averaged 64.9%, data from the National petroleum Agency, or ANP showed Monday.
It was also the highest rate since March 2014.
To be more competitive than gasoline in Brazil, the standalone biofuel has to be at most 70% of the gasoline price. So far this year Sao Paulo, in the key Center-South sugarcane region, has accounted for on average 53% of total hydrous consumption in the country.
January-September consumption in Sao Paulo totaled 7 billion liters, up 30% on the year.
Although hydrous prices are now above 70% of parity, Platts' unit Kingsman estimates that while consumption in November and December could drop slightly from September's 841 million liters it will remain well above last year's average of 642 million liters/month.
Kingsman said hydrous prices at the pump are almost Real 1/liter less than gasoline, meaning consumers still prefer ethanol. But it said if ethanol rises to 74-75% of parity, consumers might start switching back to gasoline.
Drivers have benefited as domestic prices for hydrous fuel ethanol in the Center-South were under pressure for most of the sugarcane season which began in April as millers boosted hydrous production due to liquidity in the domestic market and low sugar prices.
This changed recently due higher hydrous ex-mill prices.
Domestic prices surged after the 6% gasoline price rise in late September combined with reduced hydrous offers on the spot market with mills storing ethanol for the intercrop period starting next month.
"With gasoline and ethanol prices higher for consumers, demand for both tends to decrease a bit. Drivers will only use their cars when it's really necessary,", a producer told Platts. "Demand won't decrease more as the country has a huge deficit in public transportation."
The Platts hydrous ethanol assessment ex-mill Ribeirao Preto was Real 1,970/cu m ($519/cu m) Monday, up from Real 1,755/cu m a month ago. It averaged Real 1,468.10/cu m in September.
