Early December 2024: Trend Shifts for the US and Brazilian Ethanol Prices

Ethanol prices in both the United States and Brazil experienced a decline, driven by a combination of reduced export demand, supply constraints, and fluctuating production levels during early December. Despite steady production in the U.S., the overall market saw downward pressure, while in Brazil, the supply dynamics reflected a shift towards corn-based Ethanol amid a slower pace of sugarcane processing.

In the United States, Ethanol prices faced a slight decrease, primarily due to a decline in export demand amidst high inventories. Although it’s production remained steady with a marginal increase in daily output, fuel stocks declined by nearly 2%. This drop in inventories, combined with a reduction in exports, put pressure on the market. U.S. exports averaged 123,000 barrels per day, marking a decrease from the previous week. On the other hand, blending activity showed slight growth, increasing by 10,000 barrels per day week-on-week, which reflected stable domestic demand. These trends were reported by the U.S. Energy Information Administration (EIA).

Additionally, the U.S. Department of Agriculture raised its forecast for corn use in Ethanol production for the 2024-2025 season, citing higher-than-expected usage during the fall months. While this may signal increased production potential in the coming months, supply chain challenges, particularly in transportation during winter, could limit short-term market recovery.

In Brazil, product prices also saw a downward trend during the same period, driven by a combination of reduced sugarcane processing rates and fluctuations in global Ethanol and crude oil markets. Despite the decrease in production, strong domestic demand for hydrous Ethanol helped to buffer the price decline. Brazil’s Ethanol production saw mixed results, with a significant drop in both hydrous and anhydrous Ethanol production from the previous year. However, production of corn-based Ethanol surged, accounting for 31% of total output.

Sales in Brazil continued to rise in November 2024, with domestic sales of hydrous Ethanol increasing by 10.5%. As Brazil's Ethanol industry diversifies towards corn-based production and expands its capacity, the country is positioning itself for long-term growth in both domestic and international markets. Supported by government policies promoting higher blending rates and the development of bio-hubs around sugar mills, Brazil is set to enhance its Ethanol production capacity in the coming years, as reported by UNICA.

Looking ahead, both the U.S. and Brazil's markets are expected to experience seasonal fluctuations that could impact prices and demand. In the U.S., high inventory levels during the winter months may push prices lower, but restocking and stronger domestic and international demand could support a price recovery. Rising Ethanol blending requirements and increased consumption in transportation fuels are likely to drive demand and higher prices in the summer. In Brazil, the shift to corn-based production, coupled with strong domestic demand and infrastructure investment, is expected to stabilize the market. As global trade dynamics evolve, Brazil's Ethanol market is poised for growth.