The most recent data on anhydrous and hydrated ethanol stocks accumulated in the Center-South until the end of December show high volumes compared to the previous year and the five-year average for the same period. This is evident when we look at their volumes. Anhydrous ethanol stocks were accumulated by the end of December at around 3.64 bln liters (+23.00% in the year and +14.27% compared to the 5-year average), while hydrated ethanol accumulated volumes of 5.58 bln liters (+42.85% YoY and +14.64% on the 5-year average). This pattern of high stock volumes kept the ethanol physical market (mainly hydrated) under clear negative pressure on price formation.
However, this pressure that prevented higher prices in the physical market due to high stocks in medium- and long-term comparisons proved to be valid only until the beginning of the third week of January, since it was exactly during this period that distributors entered the market firmly, making new purchases, due to lower levels of depreciation of their intermediate stocks. Based on this, SAFRAS & Mercado forecasts that anhydrous and hydrated ethanol stocks in the second half of January should see greater cuts in the short term compared to those that have already been observed so far.
Although the annual comparison and the five-year average show significant levels of advantage against the current volumes, in the margin (comparison to the immediately previous fortnight), we have moderate declines for this time of year, given that production has slowed down since December and, at that moment, demand had entered its seasonal period of highest level of consumption over the year. This explains the growth in negative adjustments in the margin seen in both anhydrous and hydrated ethanol. In the second half of November, accumulated anhydrous ethanol volumes fell by 2.50% in the margin, followed by a 4.21% decline in the first half of December and another of 7.04% in the second half of this same month.
Hydrated ethanol fell by 2.52% in the second half of November, followed by a new decline of 3.84% in the first half of December, which gave way to a new cut of 9.95% in the second half of December. These patterns of stock declines below 10% per fortnight are considered very weak for this time of year, which generally presents stock consumption levels between 13% and 18%.
This becomes even more evident when we observe that the demand levels for hydrated ethanol since August have been the highest of the year, which reinforces the significant tone of high availability of cane and ethanol supply in the current season (more information on the demand for anhydrous and hydrated ethanol can be found in the specific reports on Anhydrous and Hydrated Ethanol Sales as well as in the Biweekly Monitoring on Cane Crush in the Center-South, published in the platform’s consultancy session).
SAFRAS & Mercado expects that the consumption of stocks in the first half of January will have an average decline of 12% for hydrated ethanol and that the stock consumption pattern of the second half of January will have an average decrease of 18%. Anhydrous ethanol stocks are expected to fall by 9% in the first half of January and 12% in the second half of the month.