Brazilian Ethanol Prices Fall in Late July as Surplus and Economic Factors Weigh on Market

Santos (Brazil): The week ending July 26^th, Ethanol prices in Brazil fell by 1.2%, influenced by multiple factors. The interplay of increased supply, seasonal changes, and economic conditions led to this decline.

A strong sugarcane harvest and improved production efficiency resulted in an oversupply, exceeding demand. Seasonal influences and a sluggish Brazilian economy further decreased Ethanol consumption. Temporary adjustments in the Ethanol blending mandate for gasoline also contributed to lowered demand, while inventory adjustments by producers and distributors created a temporary surplus. Additionally, falling Ethanol prices in other major producing regions impacted the Brazilian market.

According to Grain Council FOB Santos, Brazil anhydrous Ethanol prices initially rose but dropped early in the week by 2.9% to 58.51 cents per liter. Consequently, the price of Ethanol in Brazil closed at USD 740/MT, Anhydrous FOB Santos.

Despite these challenges, UNICA reported that rain negatively affected sugarcane processing in early July, leading to an 11.07% decrease in processed sugarcane compared to the same period last year. Nevertheless, sales increased, with mills in the south-central region selling 1.39 billion liters of Ethanol, marking a 21.23% rise. Since the start of the current harvest season, total Ethanol production reached 13.14 billion liters, up by 9.73%.

UNICA also reported significant increases in sugarcane processing and Ethanol production in the second half of June. In the south-central region of Brazil, sugarcane processing increased by nearly 13% compared to the same period last year. Since the start of the current harvest season on April 1, total sugarcane processing has increased by over 13% compared to the previous season.

Brazil remains a global leader in biofuel production, particularly with sugarcane Ethanol, and has significantly expanded its corn Ethanol industry, producing 6 billion liters in 2023—an 800% increase over five years. The country excels in second-generation Ethanol from sugarcane waste, enhancing efficiency and meeting sustainability regulations. However, the rise of electric vehicles challenges Ethanol's dominance in the domestic market, where Ethanol is sold as pure fuel or blended with gasoline, supported by legislation and the RenovaBio policy.

Brazilian Ethanol producers are now targeting the international aviation market, aligning with global goals for net-zero carbon emissions. The European Union and UK have set mandates for sustainable aviation fuel (SAF), with Brazilian producers like Raízen SA and FS achieving CORSIA Plus certification, paving the way for exports and future domestic production. Despite these advances, the industry faces seasonal production fluctuations, economic slowdowns, and competition with declining prices in other regions. Ethanol prices recently fell by 2.9%, closing at USD 740/MT, influenced by increased supply and lower demand.

Brazil's commitment to clean energy, supported by decades of policy and innovation, positions it to lead global energy transitions. With its strong renewable energy infrastructure and significant biofuel sector, Brazil is set to showcase its leadership in sustainable energy at COP30 in 2025.