July 25, 2011

Brazil Already Planning Ethanol Imports in Early 2012

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

Declining sugarcane production in southeastern Brazil has increased concerns that ethanol supplies in Brazil could once again become very tight during the intra-harvest period of December to March. The concern is so great that the Brazilian Minister of Mines and Energy is still considering lowering the percentage of ethanol blended in gasoline from 25% to 18% in order to extend the current supply of ethanol. The ethanol producers in Brazil have also made plans to import at least 200 million liters of ethanol in early 2012 in order to keep the domestic supply of ethanol from tightening even more.

Now is the peak of the sugarcane harvest and representatives of the federal government, producers, and distributors are meeting to strategize how to keep the supply of ethanol at acceptable levels once the harvest is complete.

At the recent inauguration of a new sugar/ethanol mill constructed by Bunge, the Minister of Mines and Energy met with industry representatives including the president of the Union of Sugarcane Producers (Unica). The Unica president presented documentation to the Minister that as of July 1st, the production of anhydrous ethanol in Brazil, which is mixed with gasoline, is running 11% ahead of last year's production levels. The total amount of ethanol production during the 2011/12 harvest season is still in doubt though due to declining sugarcane tonnage and the possibility that the sugarcane harvest could end prematurely because of a lack of sugarcane availability.

Bunge's new sugar/ethanol mill is located in the city of Pedro Afonso in the state of Tocantins. When fully operational, the mill will have the capacity to process 2.5 million tons of sugarcane per year. The ethanol produced at the mill will be utilized in northeastern Brazil, which runs a chronic deficit of ethanol production. Bunge's total investment in the mill was R$ 600 million.

While Brazil's demand for ethanol continues to increase at a rapid pace, the number of new sugar/ethanol mills being constructed in Brazil continues to decrease. In an effort to reverse this trend, the Brazilian National Development Bank (BNDES) has increased the amount of credit available for new plant construction as well as new lines of credit available for the storage of ethanol as well.