Porto Alegre, August 20, 2026 \u2013SAFRAS & Mercado observed that the physical hydrous ethanol market ended the first half of August with a strong upward price movement in the Center-South, clearly heading toward the R$ 3.00\/liter mark. This interpretation makes sense and, above all, helps distinguish the recent rise in hydrous ethanol from a potential structural change in fundamentals. What emerges is a market that moved from excessive caution among distributors to a temporary competition for available supply, while mills have not yet been able to fully respond. The most important point is that this firmness does not necessarily mean that the market has entered a sustained bullish cycle.<\/p>\n
The movement began on the demand side, driven by inventory replenishment. With mills allocating a larger share of the production mix to sugar amid the commodity\u2019s appreciation, hydrous ethanol availability became tighter. At the same time, distributors had been operating with low inventories and purchasing very close to their immediate needs, partly because of concerns that prices could continue to decline. When Ra\u00edzen Distribuidora increased its buying appetite, it acted as a trigger for a market that was already physically tighter. From that point onward, other distributors realized almost simultaneously that they needed to replenish inventories, but encountered a market very different from the one they had expected only a few days earlier: lower supply, firmer mills and rising prices.<\/p>\n
The resumption of school activities is relevant in this process. The return of the school calendar, first in state-run schools and later in private schools, tends to increase vehicle traffic and, consequently, fuel consumption. The entire acceleration in demand cannot be attributed to this factor, but it helps explain why the need for product emerged precisely at the end of July, when the market was still operating with relatively lean inventories. The result was a kind of rush to replenish stocks: those who acted early were able to buy, while those who remained out of the market ended up having to pay higher prices.<\/p>\n
On the supply side, however, there is an important particularity. A survey of 15 mills indicates that crushing is behind schedule, despite the greater concentration of the production mix in sugar. Lower TRS, associated with recent rainfall, also limits the ability to maximize sugar production. This creates an interesting situation: mills want to prioritize sugar, but the lower industrial quality of the sugarcane prevents them from taking this allocation to the limit. As a result, a larger share of the raw material ultimately goes into ethanol production. This additional product, however, has not yet been sufficient to create the inventory pressure that would normally be expected in July and August.<\/p>\n
This is probably the key point for the coming weeks. The market is firm because demand arrived before supply was able to fully respond. As long as distributors are still replenishing inventories, mills will have greater bargaining power, and the market is likely to remain supported, with the possibility of further gains. Whether hydrous ethanol approaches or even tests the R$ 3.00\/liter level will depend less on a structural change in the market and more on the intensity and duration of this inventory replenishment process.<\/p>\n
There is, however, a very clear limit to this movement. As distributors rebuild inventories to levels considered comfortable, the urgency to buy diminishes. At the same time, crushing should gain momentum, weather permitting, gradually increasing the physical availability of ethanol. At that point, the balance of power tends to reverse: distributors stop competing for product and mills begin competing for sales. This is precisely when the \u201crat race\u201d may begin, with greater commercial pressure and a consequent price correction.<\/p>\n
The August export line-up adds an important variable. Some mills are committed to these shipments, temporarily reducing the volume available to the domestic market. Ethanol loading and unloading volumes are updated weekly by SAFRAS & Mercado on its platform. This helps support prices in the short term, but does not eliminate the underlying issue: a substantial amount of sugarcane is still available for processing. The estimate of approximately 650 million tons for the crop reinforces the perception that potential raw material supply remains high. Weather permitting, crushing should continue through December, and the possibility that some mills may need to continue processing sugarcane through the end of the season cannot be ruled out.<\/p>\n
For this reason, the period requiring the greatest attention appears to lie further ahead. July and August did not generate the inventory pressure the market had expected, but that does not mean it has disappeared. It may simply have been postponed until September and October. The longer the market remains firm, the greater the incentive for mills to accelerate crushing and bring product to market. If this additional supply encounters distributors that are already well stocked, the correction could be rapid.<\/p>\n
The outlook, therefore, is for a firm market in the short term, but with fundamentals pointing to a possible reversal further ahead. Over the next 20 to 30 days, the combination of still-low distributor inventories, recovering consumption, limited immediate availability from mills, export commitments and delayed crushing should continue to support hydrous ethanol. Once inventories are replenished and crushing accelerates, however, the market should begin to focus once again on supply. If the sugarcane does in fact become available and mills are able to increase processing rates, the same force currently supporting prices could turn into selling pressure in the following months. The market may therefore continue rising while distributors are filling their tanks; afterward, once they are well supplied and mills are crushing at a strong pace, the dynamics are likely to change completely.<\/p>\n","protected":false},"excerpt":{"rendered":"
Porto Alegre, August 20, 2026 \u2013SAFRAS & Mercado observed that the physical hydrous ethanol market ended the first half of August with a strong upward price movement in the Center-South, clearly heading toward the R$ 3.00\/liter mark. This interpretation makes sense and, above all, helps distinguish the recent rise in hydrous ethanol from a potential […]<\/p>\n","protected":false},"author":15,"featured_media":26531,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[111],"tags":[],"commodity":[34],"class_list":["post-65404","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agribusiness-eng","commodity-sugar-and-ethanol"],"acf":[],"yoast_head":"\n