Persistent rainfall in Brazil's center-south could support ethanol prices at higher levels for longer, as it disrupts mills' plans to bring forward the 2026-27 sugarcane crushing season, while low stocks and the war in the Middle East add upward pressure.
Some sugarcane plants in Sao Paulo, Goias, and Mato Grosso do Sul states planned to restart crushing operations in March instead of early April to take advantage of higher ethanol prices during the sugarcane off-season.
Argus' price for hydrous ethanol traded on an ex-mill basis in the state of Sao Paulo reached R3,805 /m³ (273¢/USG) normalized to Ribeirao Preto on 23 January, the highest since 24 January 2022. Although the price has since receded from its late-January peak, it remains at historically high levels.
Some units had initially scheduled to resume crushing operations on 10-15 March, sources told Argus. Market participants had penciled in the processing of 8mn-10mn metric tonnes (t) of sugarcane this month, up from 6.4mn t crushed a year ago. But rainfall in the region is hampering activities.
The weather forecast for the next 15 days points to accumulated rainfall of up to 90mm in Sao Paulo, up to 155mm in Mato Grosso do Sul, and up to 230mm in Goias, according to the US national oceanic and atmospheric administration NOAA.
Equipment repairs carried out by mills during the months of off-season are also working against an early start of crushing operations. In addition, starting processing earlier means giving up extra days of sugarcane maturation that could otherwise enhance its quality. As a result, many mills maintained their scheduled start date of 1-15 April, even with the prospect of attractive prices in March.
If rains through April delay crushing, ethanol stocks are likely to come under even more pressure starting in the second half of the month, which would further support a rise in biofuel prices. Brazil's hydrous ethanol stocks stood at 2.5bn liters on 15 February, 22pc less than in the same period in 2025, according to the latest data from agriculture and livestock ministry Mapa. Anhydrous stocks fell by 24pc in the same period to 2bn liters.
Hydrous stocks are sufficient to cover 45 days of domestic consumption, while anhydrous ethanol stocks would cover 51 days. The outlook is based on the requirement that 30pc anhydrous be blended with gasoline at the retail phase and the demand forecast for March-April.
War impacts
A continuation of the Middle East war, which has caused crude and fuel prices to skyrocket on international markets, may also bolster ethanol prices as increases in gasoline prices may shift consumption to ethanol.
Private refineries in Brazil have increased wholesale diesel and gasoline prices. The market is now cautiously monitoring signals from refineries operated by state-controlled Petrobras.
The company has increased diesel prices, raising concerns about fueling agricultural machinery in sugarcane fields, as it could increase ethanol production costs.
The market has begun to speculate about an anticipatory increase in the anhydrous ethanol blending mandate to 32pc from the current 30pc, as a measure to control the inflationary impact of the war. But there is no consensus among industry participants on the feasibility of advancing the proposal.
By Maria Lígia Barros
