Beginning of the sugarcane harvest brings down the price of ethanol at the mills

The beginning of the sugarcane harvest began to have an effect on the market and brought down ethanol prices at the São Paulo mills in the last week. The fall is already starting to reach the gas stations, according to Fecombustíveis (National Federation of Retail Trade of Fuels and Lubricants).

According to Esalq/USP’s Cepea (Center for Advanced Studies in Applied Economics), the price of hydrous ethanol at the plants in São Paulo dropped 8.95% last week, to R$3.4965 per liter, the lowest since the end of March.

The price of anhydrous ethanol, which is mixed with gasoline, dropped 3.86% to R$4.0663 per litre, the lowest since the first week of April.

The retreat interrupts a high cycle caused by greater demand for fuel as an alternative to gasoline at the end of the off-season, which caused low inventories, according to Unica (Union of the Sugarcane Industry).

The rains in April also delayed the start of the harvest, which helped to put pressure on prices, says Cepea in its last biweekly market assessment bulletin, published on April 20th.

“Although the price of anhydrous ethanol at gas stations was above R$ 5 per liter at service stations, distributors had to buy more ethanol in the first half of April”, says the text. “However, at the end of the period, with the rains and queues to pick up the product at the mills, demand decreased.

In March, sales of hydrous ethanol totaled 2.36 billion liters, up 3% from the same period last year, according to the National Petroleum, Gas and Biofuels Agency (ANP). April data has not yet been released.

With the rise in prices at the mills, the product also became more expensive at the pumps. According to the ANP, the liter of hydrated ethanol was sold last week at R$ 5.539 per liter, on average. In one month, the product became 10.4% more expensive.

ANP research found a liter of ethanol at almost R$7,899 in Rio Grande do Sul. In nine states, fuel could be found at more than R$7 per liter.

The rise in anhydrous ethanol also had repercussions on the price of gasoline, which rose in the last three weeks at gas stations, even without readjustments at refineries. Last week, the average price of the product reached a new record in the country, reaching R$ 7,283 per litre, according to the ANP.

The value is 0.2% higher than the previous record, reached two weeks ago, of R$ 7,270 per litre. The last gasoline adjustment at refineries was on March 11, when Petrobras announced a mega-increase in fuel prices.

In March, the government even announced an exemption from the import tariff on anhydrous, in an attempt to reduce pressure on prices, but the market believes that the measure has little impact, since the share of the product that comes from abroad is small.

The president of Fecombustíveis, Paulo Miranda, told Sheet that distributors have already started to deliver cheaper ethanol, which should be reflected in the ANP’s next weekly fuel price survey.

According to him, last week his suppliers reduced the price by R$ 0.20 per litre. This week, he says, there was another cut of R$0.10. “I’ve already passed it on to my clients,” he said.

With the rise in prices in recent weeks, ethanol is no longer viable as an alternative to gasoline in most parts of the country. Last week, for example, using the product was only advantageous in two states: Goiás and Mato Grosso.

In São Paulo, the country’s main producer, the average price of hydrous ethanol was equivalent to 76% of the average price of gasoline, above the 70% considered ideal by the market to compensate for the lower performance of engines.

With less competitiveness, says the technical director of Unica Antônio de Pádua Rodrigues, the demand for the product fell, helping to bring down the price at the mills. “The harvest actually started, there was an increase in supply and a reduction in demand due to loss of competitiveness. Now let’s see if it reaches the consumer.”