Sep 23, 2010
Ethanol Production in Brazil Concentrated in Hands of a Few
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Ethanol production in Brazil continues to become more concentrated in the hands of the largest proucers. In the year 2000, the largest ethanol producers accounted for 25% of Brazil's total ethanol production. By the 2009/10 growing season, the seven largest producers accounted for 61% of Brazil's ethanol production and by the end of the 2010/11 growing season, the same seven groups will account for 67% of the total ethanol production in Brazil. This concentration has been the result of relentless mergers and acquisitions over the last decade.
Ethanol producers have joined together in groups or pools in two ways to lower their costs by taking advantage of economies of scale. One way was for producers to join together in co-ops and the other way was for companies to join together in pools to commercialize their ethanol. The Copersucar Group is a prime example of the co-op method with 39 ethanol/sugar mills joined together in a single co-op. Bioagencia is an example of a company that pools the ethanol from individual companies which allows it market huge volumes of ethanol at reduced costs. Due to the large volumes, they can offer reduced prices for their customers.
The trend for increased ethanol production continues in Brazil and the Brazilian Minister of Mines and Energy feels that ethanol production in Brazil will increase 150% in the next nine years. Currently Brazil produces 26 billion liters of ethanol and by 2019, the Minister expects Brazil to produce 64 billion liters.
Ethanol is already a major component of Brazil's renewable energy program accounting for 18% of the total energy consumed in the country. Hydroelectric is in second place accounting for 15.7% of Brazil's total energy use.
According to the Minister, 87% of Brazil's total energy supply is from renewable sources. Nearly 50% of the U.S. energy consumption is from coal and only 10% is renewable. China relies on coal for 70% of its energy needs.