A leading Brazilian ethanol trader is forecasting an 8% rise in the average domestic price of the biofuel during the 2014-15 marketing year (April-March) as burgeoning domestic consumption is likely to more than offset tumbling export demand, newspaper Valor reported Thursday.
SCA Trading, a Sao Paulo-based company representing over 60 ethanol millers, predicts the average hydrous ethanol price in Brazil's center-south region will reach Reais 1.31/liter (59 cents/liter) in the current season, up from an average of Reais 1.21/liter in the previous one, Valor said.
While industry group Unica predicts a timid 1.2% year-on-year rise in Brazil's 2014-15 center-south ethanol production, domestic fuel consumption continues to grow at a fast pace. Hydrous ethanol sales in first-quarter 2014 jumped 18.9% to 2.9 billion liters, according to figures from regulator ANP, that Valor cited. This follows a 9.8% year-on-year increase in 2013 sales.
Hydrous ethanol is a stand-alone biofuel suitable for over half of Brazil's light vehicle fleet.
Meanwhile, the trading company anticipates a 34% contraction in 2014-15 exports compared with the previous marketing year to 1.7 billion liters.
It attributed the lower overseas sales forecast to weaker demand from buyers in the US, where weaker domestic prices and a possible downward revision to 2014 biofuel blending targets could weigh on demand.
The US government is likely to finalize 2014 biofuels targets by June.
A SCA Trading executive that Valor quoted said current domestic prices mean higher remuneration for millers against export deals, making overseas business unattractive.
In Q1, Brazil exported 336 million liters of ethanol, down 47% from the same period of 2013, Valor said. It also saw a 48.5% year-on-year plunge in revenues from these sales to $215 million, Valor said.
But export volume in April soared 34.3% to 137.4 million liters from a temporary spike in US prices, pushing remuneration up 33.5% from the previous year to $96 million, according to Valor.
