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Petrobras' decision to leave international parity aside in its fuel price policy should have an even greater impact on ethanol. “This decision is very negative for producers. The price outlook is getting worse and worse and the tendency to maximize sugar production continues in this and the next harvest as well”, says analyst Ana Zancaner from Czarnikow.
The British trading company expects a sugar mix of 47.5% in this ongoing harvest, the highest since 2011. “When Petrobras detaches itself from international prices and creates a new policy, it ends up removing the link between oil and sugar, which is important ”, he explains. The plants look at oil to decide whether they produce sugar or ethanol, a substitute for gasoline in Brazil.
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“If the international oil market explodes and Petrobras does not pass this on, it will be very harmful to the producer”, highlights the analyst.
The analyst states that the prices for selling biofuel to Brazilian producers are already below the costs for production in this 2023/24 harvest. And, after this announcement from Petrobras this Tuesday – which should benefit the consumption of gasoline, which will become cheaper and remain more competitive than ethanol –, the scenario becomes even more complicated.
“Our team calculates that the average price for ethanol producers is already below the production cost. Furthermore, the average parity in São Paulo has been around 75% for a long time [which disfavors the consumption of biofuel compared to fossil fuel], although we still have the issue of gasoline taxes from July onwards”, highlights Ana .
The Provisional Measure (MP), which decided on the reinstatement of federal taxes on fuels from March, ends at the end of June.
Without the tax on gasoline, the analyst estimates that ethanol could gain around 300 points over raw sugar, but Petrobras' recent decision would already take away part of that. “In terms of reais per liter, you would initially have an average ethanol price of R$ 2.80, but it would drop to R$ 2.50. This is already below the production cost”, he says.
“Today, sugar pays a thousand points more. Sugar is at around 26 cents/lb, but considering the pol premium and physical differential it is at 28 cents/lb, while ethanol was, before this reduction, at around 18 cents/lb”, highlights Ana about sugar much more favorable compared to ethanol in the mix decision by plants in the 2023/24 harvest.
The Center for Advanced Studies in Applied Economics (Cepea, from Esalq/USP) highlighted in a weekly analysis the slow scenario in ethane negotiations in the São Paulo spot, with the week between May 8th and 12th being the third consecutive week of price drops.
“According to Cepea employees, distributor agents adopted a more retracted stance, purchasing specific volumes. The possibility of greater declines when ethanol supply intensifies inhibits purchases involving larger volumes”, highlighted the research center in a released note.
Source: Jhonatas Simião | Notícias Agrícolas
