Porto Alegre, September 22th, 2025 – August was a period of strong and clear expansion in average hydrated ethanol prices in the Center-South region. The formation and overlap of a series of fundamental factors linked to both supply and demand have sustained the expansion of short-term increases seen since July, but which have intensified in August. Furthermore, SAFRAS & Mercado expects even sharper highs from September onward, directly linked to the evolution of these fundamental factors.
The first of these is the early transition of the crushing of the current 2025/26 crop in the Center-South region of Brazil from the first to the second half of the season. This transition usually occurs between the second half of July and the first one of August, but this season it occurred in the first and second halves of July. Therefore, SAFRAS & Mercado warns that, from August onward, the 2025/26 crop in the Center-South region of Brazil has entered its second half, with lower production levels with each passing week and fortnight.
Another factor contributing to the rise in hydrated ethanol prices is the sugar production mix, which has fluctuated between 53% and 54% over the past two months, while the typical mix for the peak of the crop is 48% to 49%. This leads to markedly weak ethanol mix patterns, further exacerbating its supply reduction in both the short and medium term.
Completing this low ethanol supply scenario is the growth in the anhydrous ethanol/gasoline blend from 27% to 30%, which, according to SAFRAS & Mercado, is expected to increase the anhydrous ethanol demand by 1.65 bln liters in 12 months. This will initially further reduce the hydrated ethanol production mix, which will see anhydrous ethanol compete even more fiercely for cane.
In a second phase, with this year’s accelerated off-season progress, hydrated ethanol stocks will also be partially reallocated to anhydrous ethanol due to the rising need for anhydrous ethanol supply amid a crop experiencing quality and quantity issues, coupled with increased demand for the gasoline blend. On the demand side, we also see the maintenance of very comfortable competitiveness levels for hydrated ethanol, of around 65% in São Paulo, which keeps a high level of sales at the pump.
Moreover, SAFRAS & Mercado warns that all of this is occurring against the backdrop of a 2025/26 crop highly impacted by climatic factors that began with the drought and wildfires of 2024 and continued into the first quarter of 2025, with a severe shortage of new seedlings to replace damaged cane fields. At the end of the second quarter of 2025, cane fields faced further adversity with a very harsh winter that saw six polar air masses impact cane fields in the Center-South region, with two frosts.
In this context, the average price of hydrated ethanol in August was BRL 3.25 per liter, up 2.20% from the previous month. This increase followed gains of 0.32% in July. Nevertheless, the annual and the 5-year price averages for the same period recorded respective lows of 2.98% and 10%, with the indexes expressed in current values, adjusted by inflation.
Last month, SAFRAS & Mercado estimated average prices for August at BRL 3.18 per liter, which were 2.15% higher than the effective prices of BRL 3.25 for the period. For September, SAFRAS & Mercado estimates average prices of BRL 3.30 per liter, which, if confirmed, will result in margin gains of 1.54%, and by 1.70% YoY.
