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March 19, 2015

Percent Ethanol Blend in Brazilian Gasoline increased to 27%

As of the 16th of March, the gasoline supply in Brazil now contains 27% ethanol which is 2% higher than the previous percentage, which had been in place for several years. In September of 2014, the Brazilian President authorized at 27.5% blend of ethanol pending the results of tests to determine if the higher percentage would damage vehicles.

Even though the tests indicated there would not be any significant problems with the higher blend, the Brazilian Automobile Association lobbied for a lower blend and a compromise was reached with the ethanol producers at 27%.

The increase was originally proposed by the sugarcane producers of Brazil as a way to increase ethanol sales. The entire sugar/ethanol sector of Brazil has been troubled in recent years by adverse weather and low prices. Sugar prices are also very low so mill owners had hoped that an increase in the ethanol sales would help their bottom line. Dozens of sugar/ethanol mills in Brazil have closed their doors in recent years due to unprofitability.

The increase was also proposed to reduce the amount of gasoline that Petrobras needed to import into Brazil. Brazil does not have enough domestic refining capacity to meet the gasoline needs of the motoring public which forced Petrobras to spend billions of dollars on imported gasoline.

The Brazilian Minister of Agriculture indicated that the increased blend percentage should translate to one billion liters of additional demand for ethanol in 2015. The anticipated additional demand comes just as the 2015/16 sugarcane harvest season gets underway.