With a good price, ethanol plants are betting on anhydrous to guarantee a 27% blend in gasoline

Ethanol reached record prices throughout the year, but anhydrous is more advantageous for mills while the price of gasoline goes through constant increases in Brazil

Ethanol plants have been betting on anhydrous, which is mixed with gasoline, and the fuel has been gaining ground in Brazilian production. In the first three months of the 2021/22 sugarcane harvest, April to June, 35,54% of the total manufactured in the Center-South was anhydrous. And this participation should grow, according to the Commercial director of BP Bunge Bioenergia, Ricardo Busato Carvalho. “Our market intelligence predicts that, by the end of the harvest, almost 40% of ethanol production in the Center-South will be anhydrous,” he said.

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According to the data, this season, the share of this type of ethanol in the total produced is the highest for the period since 2017/18, when at the time, Brazil was still undergoing a change in the gasoline price policy, which was beginning to have more frequent readjustments, based on the international parity.

Price of anhydrous ethanol is more advantageous

Currently, anhydrous has proven to be more economically advantageous than hydrated ethanol – which is added directly to vehicles, without mixing.

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“In this harvest, the price of anhydrous rose a lot”, says Stonex's sugar and ethanol consultant, Bruno Lima. “In mid-May, (the price) reached 14% above the hydrated level.” In addition, the plants do not want to jeopardize the policy that provides for the mixture of 27% of biofuel in gasoline C - entities representing distributors asked for a reduction in this percentage, claiming a failure in the sugarcane harvest and the high price of biofuel .

“No one wants to put this at risk,” said the technical director of the Sugarcane Industry Union (Unique), Antonio Padua Rodrigues. He recalls that the anhydrous ethanol market is regulated and is already contracted with distributors.

Anhydrous is usually negotiated in annual contracts with distributors. Hydrated ethanol, on the other hand, is mainly sold on the “spot” market, or in cash.

Ricardo Carvalho, from BP Bunge Bioenergia, sees the market capable of meeting the demand for fuels. “No country in the world can change the mix like Brazil, which also has good flexibility between anhydrous and hydrated”, he pointed out.

The view reflects that of most of the Brazilian sugar-energy sector, which considers the chance of supply not meeting demand to be small. Some suspect that orders from distributors are more related to price than availability.

Ethanol prices reached record highs throughout the year

Ethanol reached record prices throughout the year, as a result of the expectation of a drop in the sugarcane harvest in Brazil, the rise in sugar prices and an oil reaction after a partial resumption of consumption, with the start of vaccination against Covid-19. XNUMX.

Ethanol imports have also been lower this year, since the dollar and the price of corn (the raw material for biofuel in the United States, where Brazil will look for what is lacking) discourage purchases from abroad. With this, biofuel also helps boost the price of gasoline. With the high volume of sugar already set by the mills in a year of lower cane production, due to the climate, the anhydrous and hydrous prices should remain sustained.

Lima, from StoneX, says that the mills “are very committed to sugar fixation, so there is less space to change the mix”. Advance sales of the sweetener are at high levels. Sugar prices in Reais reached nominal records throughout the year. ”

Several mills think about changing the mix, but few do it”, says the analyst. “We see more performance contract cancellations due to the crop failure than to switch to ethanol.”