Brazil Agricultural Products: CNPE approved the increase in ethanol mandatory blending to 32%

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Brazil Agricultural Products: CNPE approved the increase in ethanol mandatory blending to 32%

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14 Jul 2026 12:39:33 ET │ 13 pages

Brazil Agricultural Products

CNPE approved the increase in ethanol mandatory blending to 32%

CITI'S TAKE

As expected, CNPE approved the increase of anhydrous ethanol

mandatory blending in Gasoline C to 32% (from 30%) (Globo, 07/14/26),

for 180 days, being able to be extended for the same period (g1,

07/14/2026). We see the measure as positive for the S&E sector, as we Gabriel BarraAC

believe the measure could improve anhydrous ethanol demand for c.1bn L +55-11-4009-2223

per year, implying a lower dependency of imported gasoline. However, we gabriel.barra@citi.com

note that the measure may not be sufficient to balance the domestic SxD,

Pedro Gama since we are seeing a huge increase in ethanol production, driven by a

higher ethanol production mix in S&E mills and an increase in corn ethanol +55-21-4009-0431

pedro.gama@citi.com production, as we discussed in our previous note. Meanwhile

studies/tests for higher rates are ongoing, which could enable the CNPE to

announce more increases in the future, such as 35%, as established in the

Future Fuel Law.

With the measure, we expect gasoline prices at the pump to decrease a bit, since

anhydrous ethanol has lower prices than gasoline A. However, we highlight that

Petrobras is keeping gasoline prices below international parity. According to

ABICOM (07/14/2026), currently domestic gasoline prices are trading -R$0.79/L (-

31%) below international parity, while Petrobras gasoline -R$0.99/L (-39%). If

Petrobras increases the price of gasoline in its refineries, eliminating the price gap

between the imported price, we could see an increase in its Revenues/EBITDA of

c.US$4.4bn per year.