Untimely rain lifts São Paulo ethanol prices despite abundant stocks

Production stoppages tighten short-term supply

Untimely rainfall across Brazil’s Center-South has interrupted sugarcane processing and pushed ethanol prices higher in São Paulo, the country’s largest fuel market, despite abundant stocks and a strong 2026/27 harvest. G1 reported the market assessment from the Center for Advanced Studies in Applied Economics at the University of São Paulo’s Luiz de Queiroz College of Agriculture, known as Cepea/Esalq.

Cepea/Esalq’s weekly indicator placed hydrous ethanol at R$2.3991 per liter in the week from August 31 to September 4, excluding freight and taxes. That was 3.79% above the preceding period and equivalent to US$0.4672 per liter. The institute said heavier-than-expected rain since late August continued into the first week of September, stopping operations in producing regions and allowing sellers to maintain firm offers.

The disruption has created an immediate supply constraint rather than a shortage caused by weak overall production. Mills cannot crush wet sugarcane at their normal pace, limiting near-term availability even when inventories are substantial. For distributors and fuel retailers, the result is higher replacement costs in the spot market until weather conditions permit processing and deliveries to normalize.

Retail demand adds support

Demand also strengthened around Brazil’s Independence Day holiday on September 7. According to Cepea, smaller distributors returned to the market for new purchases as retail fuel sales accelerated. The combination of temporary production stoppages, firm sellers and stronger downstream demand helped hydrous ethanol extend the gains recorded during August.

The average hydrous ethanol price during the full weeks of August was R$2.2020 per liter, an increase of 3.11% from July and the first monthly gain of the 2026/27 season in São Paulo. From R$2.0457 per liter in the week of August 3-7, the indicator climbed 7.24% to R$2.1939 in the following week. By the first week of September, it had risen about 17.27% from its early-August level.

Anhydrous ethanol, which is blended into gasoline, followed the same direction. Its average spot price reached R$2.4750 per liter in August, up 1.59%. After beginning the month at R$2.3091 per liter, the product recorded weekly increases ranging from 1.96% to 5.32%, before a final 6.85% jump took the price to R$2.7829 per liter in the first week of September.

Sugar prices rise as mills favor ethanol

The effects extend beyond the fuel market. São Paulo’s spot indicator for white crystal sugar increased from an average R$93.02 per 50-kilogram bag in the first week of August to R$108.53 at the end of the month. Cepea attributed the rise to restricted supply, while international demerara sugar prices remained supported by projections for a global production deficit.

Cepea said data from Brazil’s Ministry of Agriculture and Livestock showed that increased sugarcane crushing in the Center-South had not translated into proportionally greater sugar availability because the additional cane was absorbed by higher ethanol production. The institute expects this imbalance to keep sugar supply constrained through the remainder of the cycle. Mills therefore face a commercially significant allocation decision: strong ethanol prices reward fuel output, while limited sugar availability supports crystal sugar values. Weather-related interruptions are amplifying both trends in the short term, leaving distributors, traders and industrial buyers exposed to firmer replacement prices even though the underlying harvest and ethanol inventories remain robust.