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Brazil domestic ethanol sales soar amid high inventories

(Reuters) - Sales of ethanol in the Brazilian market increased sharply in January according to industry data released on Thursday with mills very active in the selling side as they are apparently running out of storage space due to a bumper crop.

Total ethanol sales in the domestic market in the first half of January rose 44% year-on-year, said industry group UNICA, to 335.5 million gallons. Sales of hydrous ethanol, the type that competes with gasoline at pumps for the preference of car owners, rose even more, up 83%.

Mills are selling large volumes despite low current prices. Hydrous ethanol prices in January hit the lowest for the last two years according to Cepea Esalq, a research center at the University of Sao Paulo (USP).

Very high stocks of ethanol following a record sugarcane crop in Brazil in the 2023/24 season are driving mills to sell the product even at low prices, said Filipi Cardoso, a sugar and ethanol analyst at broker StoneX.

He added that fuel distributors are active in the buying as they build inventories before an expected change in state taxes in February that would make gasoline more expensive, potentially benefiting ethanol sales.

Brazil's center-south sugarcane crushing totaled 1.11 million metric tons in the first half of January, UNICA said, up 152.3% from a year ago as the current season nears its end.

UNICA said in a report that sugar production totaled 48,000 tons in the period, up 148.6% year-on-year, while total ethanol output rose 62.4% to 338 million liters.

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