Hydrous ethanol stocks in Brazil's Center-South at January 15 stood at 2.54 billion liters, down 40% from a year ago, data from the Agriculture Ministry (MAPA) showed Thursday.
It is also down 20% from the end of December, a decline of 616 million liters, the lowest recorded level in the previous five seasons.
The total includes hydrous ethanol for fuel and industrial usage.
The sharp drop in stocks is a result of strong demand for hydrous fuel in the domestic market.
Since the beginning of the sugarcane season in April through January 15, hydrous sales (fuel and industrial) to the domestic market totaled 14.5 billion liters, up 35% compared with same period a year earlier, according to the latest report from industry association UNICA.
Hydrous is used in Brazil as a standalone biofuel (E100) in flex-fuel vehicles, while anhydrous is mixed with gasoline at a proportion of 27%.
Anhydrous stocks stood at 3.03 billion liters by January 15, down 7% from same time a year ago and down 13% from the end of December, MAPA data showed.
The drop in anhydrous stocks is not as sharp as hydrous, as anhydrous sales to domestic market from April through January 15 increased just 2% year on year to 7.77 billion liters, UNICA showed.
Mills boosted hydrous production rather than sugar this season due to liquidity in the domestic market and lower sugar prices.
Estimates from Platts agricultural unit Kingsman points to a very tight situation for hydrous and anhydrous stocks in CS Brazil on April 1, 2016, the so-called "inventories passage," with almost zero hydrous in stock and roughly 230 million liters of anhydrous, a situation never seen before. For this calculation, Kingsman is not considering any anhydrous imports or ethanol transfers to the North-Northeast region.
In order to alleviate the tightness, Kingsman estimates that mills will need to start the 2016-17 season earlier than normal to supply the domestic market and imports into Center-South region should be considered. Mills usually start operation in April, but some mills could start as of mid-February. The only concern is the weather, because it has been raining at above-average rates in CS Brazil due to the El Nino weather pattern.
