August 29, 2011

U.S. to Surpass Brazil in Ethanol Exports

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The United States is poised to take over the lead from Brazil and become the largest ethanol exporter in the world. According to the Renewable Fuel Association, from January to May of this year, the U.S. has already exported 533 million liters of ethanol and estimates are that the total for 2011 will be 1.9 to 2.0 billion liters. If this estimate does turn out to be the case, then the U.S. will surpass Brazil who is expected to export 1.2 to 1.6 billion liters during the same period.

The U.S. is going to surpass Brazil in ethanol exports because of reduced import tariffs on U.S. ethanol and the fact that Brazilian sugarcane production has been disappointing for three years in a row and the country is having a difficult time meeting domestic ethanol demand.

South-central Brazil is where 89% of Brazil's sugarcane is produced and ethanol exports from this region reached their peak in 2008/09 when 4.2 billion liters were exported. Ethanol exports have fallen yearly since then as the domestic demand has increased and sugarcane production has decreased. Ethanol exports from Brazil in 2010/11 were 1.9 billion liters and they are expected to be 1.2 to 1.6 billion liters during the 2011/12 harvest season. As Brazilian exporters have pulled back, U.S. exporters have increased their sales in Mexico, Canada, Europe, and Asia.

As sugarcane production has declined, Brazil has actually been forced to import ethanol to meet domestic demand during the intra-harvest period from December to March. Since April of 2011, Brazil has imported 190 million liters of ethanol and existing contracts indicate that they will import at least 600 million more for a total of 790 million liters between April of 2011 and March of 2012. Some private analysts in Brazil feel the eventual total imports could be as much as double this amount.

The Union of Sugarcane Industries (Unica) is currently estimating that Brazilian sugar/ethanol mills will process 510 million tons of sugarcane before the harvest ends in December, which would be 8.4% less than the previous year. Many private analysts though feel the number will be below 500 million tons.

Unica recently reported that since the harvest began in April until mid-August, 12 billion liters of ethanol have been produced, which is 18.7% less than the same period in 2010. They also reported that sugar production during the same period has totaled 17.4 million tons which is 10.8% less than last year and the total tonnage of sugarcane processed thus far has been 297 million tons, which is 12% less than last year.