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With a greater supply of ethanol, driven by sugarcane and grain ethanol, producer prices have fallen 23% since April, improving parity in Belo Horizonte and exposing differences in consumer pass-through in Minas Gerais cities.
Abundant sugarcane and the advancement of grain ethanol have increased the supply of biofuel and reduced producer prices by 23% since April, directly impacting competitiveness against gasoline in Belo Horizonte.
Sugarcane increases supply and changes ethanol prices
The movement in the ethanol market occurs due to the combination of two factors: the increase in sugarcane production and the expansion of grain ethanol. With more product available, the pressure on producer prices increased, leading to the accumulated drop since April.
This reduction at the origin of the chain is relevant because ethanol depends on pass-throughs until it reaches the pumps. When supply grows, the producer receives less for the biofuel, but the consumer only notices the effect when distributors and stations adjust their prices.
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More than 232 Brazilian companies have already moved to Paraguay, as taxes stifle the national industry and the “Custo Brasil” transforms the neighboring country into a refuge for those who can no longer bear the high costs of producing in Brazil.
In Minas Gerais, the topic gained traction because Belo Horizonte already presents a favorable relationship for those comparing ethanol and gasoline. Parity reached 62.5%, indicating that the biofuel became more competitive in the Minas Gerais capital.
Parity in Belo Horizonte favors the consumer
The parity between ethanol and gasoline is one of the main indicators used by flex-fuel vehicle drivers when refueling. When the price of ethanol becomes proportionally lower, the savings at the pump become more visible.
In Belo Horizonte, the percentage of 62.5% shows that ethanol has started to offer a direct advantage over gasoline. The data reflects the impact of the greater supply and the drop in producer prices on the cost.
The 23% reduction since April, however, does not automatically mean that the entire decrease will reach the driver. The price at the pumps depends on pass-throughs along the chain, including distribution, station margins, and local conditions.
Even so, the scenario reinforces the role of sugarcane in the formation of ethanol prices. When production grows, the biofuel gains strength as an economic alternative, especially where the price drop is passed on more quickly.
Unequal pass-through limits the effect of the drop at the pumps
The president of Siamig, Mário Campos, drew attention to differences between cities in Minas Gerais. While Belo Horizonte already registers favorable parity, municipalities like Uberlândia still resist passing on the price drop.
This regional difference shows that the market does not react uniformly. Two consumers in the same state may face different realities, even in the face of the same drop in producer prices.
In places where the pass-through is delayed, the advantage generated by the greater supply of ethanol does not appear with the same intensity. The consumer needs to observe the prices at the stations before deciding which fuel is more worthwhile.
The case of Uberlândia highlights this mismatch. The drop at the source exists, but the final price may remain less attractive if the reduction does not advance through the subsequent stages.
Ethanol gains strength, but depends on the local market
The advancement of grain ethanol also helps explain the expansion of supply. Alongside sugarcane, this production increases the availability of biofuel and contributes to easing producer prices.
The competition with gasoline remains conditioned by the local behavior of prices. In Belo Horizonte, the parity of 62.5% indicates direct savings. In other cities, the benefit may be smaller while the pass-through does not occur.
For the driver, the main practical advice is to compare prices at the time of refueling. The 23% drop for the producer improves the environment for ethanol, but the final decision depends on the price found at each station.
With high sugarcane production, expanded supply, and growing grain ethanol, the biofuel has gained competitiveness. The impact for the consumer, however, will be greater where the reduction reaches the pumps.
How sugarcane ethanol is made
First, the sugarcane is harvested and taken to the mill. There, it undergoes milling to extract the juice. This juice contains natural sugars, which serve as food for microorganisms during fermentation.
Then, the juice is treated and mixed with yeast. The yeast consumes the sugar and transforms this material into alcohol and carbon dioxide. This process is called fermentation.
Next, the fermented liquid goes through distillation. In this stage, the alcohol is separated from the water and other substances, forming ethanol. To become fuel, it may still undergo concentration and quality adjustments.
With information from Itatiaia.
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