The most recent data from the Ministry of Agriculture (MAPA) that indicate the evolution of biweekly anhydrous ethanol and hydrated ethanol stocks in the Center-South showed an exponential evolution in the consumption of stocks of both biofuels, with emphasis on hydrated ethanol, which had a consumption rate of 1.66 bln liters between the first and second half of January, while anhydrous ethanol had a consumption of 935 mln liters.
For example, the consumption of 1.66 bln liters in the second half of January accounted for a 117% increase YoY (compared to the consumption of 764 mln liters from stocks at the same time last year) besides a 134% increase in the margin (compared to the demand of 709 mln liters of hydrated ethanol in the first half of January this year), besides a 95% growth over the 5-year average for the same period, which indicates a stock consumption pattern over the last 5 years of 851 mln liters.
The detail is that anhydrous ethanol is not far behind with its consumption pattern of 935 mln liters of stocks in January. This volume accounted for a 95% increase YoY in the consumption rate, a 175% growth in the margin, and an 87% increase over the 5-year average for the same period. In the first half of January, only 340 mln liters of anhydrous ethanol were consumed from the Center-South stocks, while at the same time last year, the consumption rate had been 478 mln liters, while the five-year average for the same period is the consumption of 500 mln liters.
As a result, the Center-South stocks for hydrated ethanol closed January at 3.55 bln liters (-14% YoY and -31% in the margin) while those for anhydrous ethanol closed January at 2.58 bln liters (+6% YoY and -26% in the margin). Considering the distributors’ demand for anhydrous ethanol from mills in January of 1.08 bln liters and the demand for hydrated ethanol at 1.83 bln liters, we can say that the remaining anhydrous ethanol stocks cover 2.37 months of demand in the Center-South region, and the hydrated ethanol stocks cover 1.94 months of demand in the same region in January.
In December, this capacity to meet the demand for anhydrous and hydrated ethanol from their respective stocks fluctuated respectively at 3.75% and 3.36%, indicating a sharp decline from December to January. SAFRAS & Mercado’s perception is that mills are beginning to position themselves in advance in January to sell their carryover stocks, even before the arrival of the new crop, given not only the end of the crushing process in the Center-South region.
There is also an ongoing perception that the future 2025/26 crop will be very intense in terms of cane production volumes, which will lead to a very large supply of ethanol, especially in the first four fortnights of the season, when the average crushing mix at mills ranges from 70% to 100% for ethanol. In addition, mills have observed that trading prices on the physical market have been firm since December, which offers an excellent opportunity to sell before the new crop begins (earlier than normal or not) and prices fall again.
Therefore, it is important to sell off stocks at high prices during the off-season rather than carrying them for longer (and at a higher cost) to sell at the start of the new crop and get sharply lower prices in the second quarter of the year. Another point of alert is the issue of the competitiveness of hydrated ethanol against gasoline, which has declined in January and February, clearly heading toward the average of 68% in SP, compared to a pattern of 65% for the last six months, which generates downward pressure on consumption. Therefore, mills intend to clearly avoid a scenario of low demand amid the high supply that the transition from the first to the second quarter will bring to the region, which justifies the high flow of stocks in January, without worrying about the rest of the off-season.
One of the points that is in line with this issue is the estimate of the earlier-than-normal crushing by mills in the Center-South. The most recent data collected by SAFRAS & Mercado during the first half of February show that five mills began crushing the new crop in the first half of February and that another 15 mills should do the same in the second half of the month. For March, our estimate is that 38 mills will start crushing in the first half of the month, and 50 mills in the second. For April, 60 mills will start it in the first half and 80 in the second half, with a total expected of 260 mills in operation in the 2025/26 crop.
