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UPDATE 1-High ethanol stocks keep prices in check in Brazil, boost demand

(Recast to include report details, comments from Unica, context) By Marcelo Teixeira SAO PAULO, Feb 12 (Reuters) - High stocks of ethanol in Brazil, a result of a switch away from sugar production by local mills, are keeping prices for the biofuel in check, allowing for demand to continue strong in the country, cane industry group Unica said on Tuesday. The group said that sales of hydrous ethanol, the type that competes directly with gasoline for the preference of flex fuel car owners, reached 1.3 billion liters in January, the highest ever volume for that month, and 32 percent more than in January 2018. According to data from Brazil's Agriculture Ministry, ethanol stocks at mid-January were 7.29 billion liters, the highest volume since 2015, as mills favored production of the biofuel during the season due to low global sugar prices. As a result, the biofuel continued to have a large price advantage over gasoline in the main fuel-consuming regions, despite recent decreases in prices for the oil-based fuel. "A more advantageous price for hydrous ethanol is a result of higher supplies in the current between-harvests period, benefiting consumers," said Antonio de Padua Rodrigues, Unica's technical director. Mills stocked up in the hope to sell at better prices in the between-harvests time, when cane crushing basically stops and the companies only sell what they have in storage. But falling gasoline prices put a lid on values for the biofuel. Broker and analyst INTL FCStone sees comfortable ethanol stocks all the way through April, when the new crop kicks off in Brazil's center-south. It projects stocks of at least 2.5 billion liters at the end of the current season, with a possibility for them to reach as much as 3.1 billion liters if demand falls. Brazil's fuels regulator ANP said gasoline prices in Sao Paulo, Brazil's largest fuel market, were little changed in January compared to the same month a year earlier, while hydrous ethanol values were 8 percent cheaper in the same comparison. Only four mills remained crushing cane in Brazil's center-south late in January, as the season has practically ended. Sugar production was marginal at 5,000 tonnes in the second half of January compared to 11,000 in the previous two-week period. Mills crushed 563,000 tonnes of cane versus 524,000 tonnes in the first half of the month, Unica said. (Reporting by Marcelo Teixeira Edited by Alistair Bell)

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