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October 30, 2014

Higher Ethanol Blend in Brazil (27.5%) Passes Preliminary Tests

President Dilma Rousseff signed new legislation several months ago authorizing the amount of ethanol blended into the Brazilian gasoline supply to increase from the present 25% to 27.5% provided that there were no technical problems caused by the increase. The new legislation required that a series of tests be performed to insure the feasibility of the increased mixture

Preliminary results from those tests have indicated that the increased blend does not adversely impact engine performance and that emissions were only slightly impacted by the increased blend. The tests were conducted at the Petrobras Research Center (Cenpes) and they found that emissions of nitrous oxide were slightly increased by the new blend mixture. The levels of carbon dioxide and carbon monoxide were actually lowered by the new blend.

The Brazilian Automobile Association had opposed the increased mixture citing potential technical issues especially with older vehicles that do not have flex-fuel engines.

Sugarcane producers on the other hand had been pushing for the increase as a way to increase the demand for anhydrous ethanol which is one of their most profitable products. The Brazilian government also wanted the increased blend as a way to reduce gasoline imports and as a way to hold down gasoline prices.

There is no defined timetable for when these tests will be completed, or when the final decision will be made concerning the new blend percentage, but researchers conducting the tests feel they should be completed by the end of the year.

The potential increased blend was scheduled to take effect in May of 2015, which would be shortly after the start of the sugarcane harvest, but a spokesperson for the sugarcane producers indicated that they would like to see the increased blend start in January of 2015. Industry representatives are scheduled to meet with government officials next week to discuss the issue.

Starting the higher blend in January probably will not be feasible due to this year's disappointing sugarcane harvest. The current harvest is ending sooner than normal due to low sugarcane yields caused by dry weather. The first period of dry weather occurred in December and January and the main sugarcane producing region of southeastern Brazil is still awaiting the arrival of this year's rainy season. Generally the rains start in September, but as of now, the area remains mostly dry.