May 06, 2010
Brazil's Increasing Ethanol Production Driven by Internal Demand
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The steady increase in the use of flex fuel vehicles in Brazil will insure continued increase demand for ethanol, which is expected to double within the next ten years. In 2009, there were approximately 24.8 million flex fuel vehicles in Brazil and that is expected to increase to 39.7 million vehicles by 2019. Within ten years, flex fuel vehicles are expected to account for 78% of all the vehicles on the road and gasoline only powered cars would account for just 22%.
The internal demand for ethanol in Brazil is currently 22.8 billion liters and that is expected to increase to 52.4 billion liters in ten years. Ethanol exports are expected to triple from 3.3 billion liters in 2009 to 9.9 billion liters in 2019. Currently exports account for 14.4% of Brazil's ethanol production and in ten years, exports are expected to account for 18.8% of Brazil's ethanol production.
To accommodate the increased demand for ethanol production, Brazilian sugarcane producers need to expand their sugarcane acreage. Currently, sugarcane production occupies 2.4% of Brazil's cultivated land area and only 1% of Brazil's total agricultural land area. The total potential agricultural land area in Brazil is 790 million hectares, but when sensitive areas such as rain forest, wetlands, protected areas, and land that is highly erodible or prone to flooding, are excluded, the potential area for sustainable agricultural production in Brazil drops to 100 million hectares.
Even though there is a huge amount of land in Brazil that could produce sugarcane, the sugarcane producers in Brazil want to insure that Brazil's sugarcane production is considered sustainable. According to Geraldine Kutas, senior advisor to the Union of Sugarcane Industries - UNICA, the Brazilian sugarcane producers association has been working with Winrock International to develop standards for sustainable sugarcane production in Brazil. These standards include social, economic, and environmental guidelines.
One of the ways they are prepared to meet those sustainability standards is to push for expansion of sugarcane production into areas of degraded pastures. The Brazilian agricultural research service, Embrapa, has conducted years of research indicating that Brazilian sugarcane expansion should be directed into areas of degraded pastures instead of clearing new land for additional sugarcane production. If sugarcane production occupied only 25% of Brazil's degraded pastures, which would equate to an additional 12.6 million hectares of sugarcane production or enough to produce three times more ethanol than what the Food And Agriculture Organization estimates will be the internal demand for ethanol in 2017.
By expanding sugarcane production into pastureland, it also mutes the argument made by critics of biofuels that fuel produced from crops takes away land that could be used for food production. Brazil has enough land resources to produce both fuel and food, at least for the foreseeable future.