E32 Blend Increase Supports Brazil‘s Ethanol Market Amid Supply Rise

Research evidence excerpt

E32 Blend Increase Supports Brazil‘s Ethanol Market Amid Supply Rise

Update

July 14, 2026 03:28 PM GMT

Morgan Stanley C.T.V.M. S.A.+MLatAm Agribusiness | Latin America Julia Rizzo

Equity Analyst and Commodities Strategist

E32 Blend Increase Supports Julia.Rizzo@morganstanley.comJulia Habermann +55 11 3048-6114

Research Associate

Julia.Habermann.Oliveira@morganstanley.com +55 11 3048-6096

Brazil's Ethanol Market Amid

LatAm Agribusiness

Latin America

Industry View In-LineSupply Rise

The CNPE approved a temporary increase in Brazil’s mandatory anhydrous

ethanol blend from E30 to E32 (valid for 180 days, renewable), in line with prior

government signaling (link). The measure is part of a broader strategy to reduce

gasoline imports (~450mn liters, according to government estimates), expand the

renewable share in the transport matrix and support the domestic biofuels industry,

at a time of rising ethanol supply (notably from corn). We estimate the change adds

~800–900mn liters of incremental ethanol demand annually (~2.5% vs prior

baseline), helping absorb elevated inventories and support domestic ethanol prices,

currently ~15% YoY lower (≈14.5c/lb sugar equivalent). Importantly, according to the

news, the government is advancing studies under the “Fuel of the Future” Technical

Committee to evaluate higher blending ratios, including E35 (here).

From an investment perspective, the decision is supportive for sugar prices and

Brazilian sugar & ethanol producers by providing a near-term demand cushion

amid weak pricing, although largely anticipated by the market. The incremental

demand should contribute to inventory normalization and margin stabilization into

2H, but is modest relative to the recent supply expansion. SMTO3 (OW) which