May 04, 2010
Ethanol Once Again More Economical Than Gasoline in Sao Paulo
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
As of May 1st, the percentage of ethanol in Brazil's gasoline supply returned to 25%. During the February-March-April period it had been lowered to 20% as a way to extend the limited supply of ethanol available to the market between sugarcane harvests. The 2010-11 sugarcane harvest has now started and the increased ethanol supply has resulted in lower ethanol prices.
The state of Sao Paulo is responsible for 50% of Brazil's ethanol consumption and as of the third week in April, the price of ethanol was once again competitive with that of gasoline. During the third week of April, the average price of gasoline in the state of Sao Paulo was R$ 2.44 per liter or approximately US$ 5.29 a gallon. The price of ethanol was R$ 1.708 per liter or approximately US$ 3.70 a gallon. In the city of Sao Paulo, ethanol prices were even cheaper at R$ 1.525 per liter or US$ 3.31 a gallon. This is 10% cheaper than the break-even price for using ethanol. Any time the price of ethanol is 70% or less than the price of gasoline, it is more economical to use ethanol.
In other sugarcane producing states, ethanol once again has become the more economical fuel for light vehicles. In the state of Goias, ethanol is 59% the price of gasoline, in Parana, Mato Grosso and Sao Paulo, its 62%, and in Tocantins its 67% the price of gasoline.
According to the Ministry of Agriculture, sugarcane producers in Brazil are expecting to harvest over 600 million tons of sugarcane during the 2010-11 growing season and 55% of the sugarcane will be used to produce 28.5 billion liters of ethanol and 45% will be used for sugar production. Sometime during 2011, it's estimated that approximately 50% of the light vehicles in Brazil will be flex fuel vehicles, so the demand for ethanol is expected to continue increasing.