Hydrated ethanol intensifies its positioning below New York sugar, reinforcing a scenario observed since March this year of strong depreciation of the biofuel. Intensification of the negativity occurred even under new perspectives of higher prices for the fourth quarter of 2020 and the first quarter of 2021. Stronger real against the dollar and more valued sugar reinforced the tone of depreciation of ethanol against sugar in cents.
In August, the average price ratio between hydrated ethanol in the Brazilian physical market and raw sugar prices in New York ended up reinforcing the predominance of the biofuel disadvantage compared to the commodity, in a movement that was not expected in the previous month due to the outlook of higher prices for the biofuel, which occurred indeed. Despite the advances in ethanol, the exchange rate became unfavorable to the biofuel prices, with the real depreciating against the dollar and sugar in New York growing higher in the short term.
This reinforced the scenario of a strong negative relationship for hydrated ethanol. Since the beginning of this phase of lower comparative prices, still in March 2020, the month of August was the second-worst moment for the biofuel, by setting a ratio of -22.43%, second only to May (-22.65%). Despite this, SAFRAS & Mercado warns that there is still a scenario of a strong change in the remainder of the second half of 2020 and the first half of 2021. Although the advance of ethanol has been moderate in the short term, to the point of exchange rate movements and sugar neutralizing them, new bullish prospects are projected for the fourth quarter of 2020 and the first quarter of 2021, pointing to negotiations at the end of each period in the range of BRL 2.30 to 2.45, respectively, in sharp contrast to the current level of BRL 2.22. On the other hand, sugar in New York must have an advance of about 100 points only in the change of the driver contract from the first to the second screen in New York, from October 2020 to March 2021. Therefore, these hydrated ethanol gains must be partially offset by the prospect of a high in sugar.