Ethanol Prices in Brazil Stay High Amid Climate and Policy Challenges
Ethanol prices in Brazil remain high due to climate impacts, shifting production priorities, and regulatory policies, with elevated costs and volatility expected through 2026.
- • Droughts and heatwaves have reduced sugarcane productivity, limiting ethanol supply.
- • Production has shifted towards sugar, reducing ethanol output especially hydrated ethanol.
- • Regulatory frameworks like RenovaBio sustain structural demand for biofuels, keeping prices high.
- • High input costs and seasonal supply constraints contribute to sustained ethanol price volatility.
Key details
Ethanol prices in Brazil continue to remain elevated due to a complex interplay of supply shocks, rising costs, and regulatory factors. Prolonged droughts and heatwaves in Brazil's Central-South region—the primary sugarcane producing area—have significantly lowered sugarcane productivity, reducing ethanol availability and driving prices up across the supply chain. Additionally, ethanol prices experience seasonal increases during the off-season when sugarcane supply dips.
A shift in production preference towards sugar, buoyed by strong international sugar prices, has further constrained ethanol output, particularly hydrated ethanol, which is more vulnerable to short-term supply fluctuations. Moreover, the demand for anhydrous ethanol, blended with gasoline, restricts the supply available at fuel stations, exerting additional price pressure.
Brazil's regulatory environment, particularly through policies like RenovaBio, institutionalizes a steady demand for biofuels by assigning economic value to emissions reduction. This regulatory framework supports high ethanol prices amidst tight supply. Rising gasoline prices, influenced by international oil trends and currency volatility, also allow ethanol prices to remain competitive and aligned with fossil fuel markets.
Input costs are notably high, including fertilizers, agricultural chemicals, diesel, electricity, and logistics, limiting the sector’s ability to absorb cost shocks without passing them to consumers. Market forecasts suggest that ethanol prices and volatility will remain elevated through 2026 due to adverse climate conditions, competitive international sugar markets, and enduring regulatory demand. The ethanol market has settled into a new equilibrium more closely linked to climate factors and integrated with fossil fuel pricing, supported by structural demand from regulatory measures.
This article was translated and synthesized from Brazilian sources, providing English-speaking readers with local perspectives.
