Jan 25, 2010
Petrobras Declares No Need To Import Corn-Based Ethanol From The U.S.
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Starting last October, domestic prices for ethanol in Brazil started to increase due to spot shortages of ethanol in the retail market. As a result, the Brazilian government decided to reduce the percentage of ethanol in Brazilian gasoline from 25% to 20 starting February 1st. The reduction is scheduled to remain in place for 90 days. The 5% reduction is expected to reduce ethanol demand by 100 million liters per month or the equivalent of one to two days of total demand. Officials from Petrobras announced late last week that due to this action, no corn-based ethanol from the U.S. will be needed to be imported into Brazil.
The intra-harvest period (between December and March) is usually a time of rising ethanol prices in Brazil, but this year the price rise has been historic. In the state of Sao Paulo, the average price of ethanol at the pump is currently R$ 1.791 per liter or US$ 3.89 a gallon. According to Petrobras officials, by the month of June, they expect the average statewide price of ethanol in Sao Paulo to fall back to R$ 1.168 per liter or US$ 2.53 per gallon.
Heavy rains at the end of the last harvest season disrupted harvest activities and lowered the amount of sucrose in the sugarcane, thus lowering the amount of ethanol produced. Sugar mill operators also adjusted their processing facilities to produce a little more sugar in order to take advantage of the highest international sugar prices in nearly 30 years. International sugar prices have risen to a large degree because India, the world's largest consumer of white sugar, has not been able to meet domestic demand for two years in a row forcing them to import sugar at a time when world supplies are very tight.
Currently, sugar mills in Brazil are closed for their annual maintenance. At the end of February or early March the new sugarcane harvest will resume and by April or May, all of Brazil's sugar mills should be running at 100%. After all the sugar mills resume operations, ethanol shortages are expected to be eliminated and domestic sugar prices are expected to remain in check.