BRAZIL: Ethanol supply availability for all markets unlikely
Published: 08/31/2010, 7:02:55 AM
Brazil's sugar and ethanol industries may have opportunities to feed demand of some of the world's largest countries in the next few years, but there's doubt over how rapidly Brazil producers could respond, reports Sugaronline.
UNICA's chief representative in the US, Joel Velasco, is cautiously optimistic that the Americans' ethanol import tariff could be allowed to expire at year's end, or weakened dramatically between now and December by a Congress being bombarded more and more each day by calls to drop costly, protectionist tariffs, he said. Velasco joined speakers from China, India and the EU to wrap up the opening-day forum of the 18th annual Fenasucro & Agrocana expo in Sertaozinho, Brazil's largest cane industry trade fair.
"We have to make clear to the American public that sugarcane ethanol improves the environment, it's a cleaner fuel (than maize ethanol), and it's actually cheaper for the US citizen," Velasco said. UNICA has ramped up its advertising and public relations campaigns in the US drastically over the last year, creating new informational Web sites for the US consumer that spell out cane ethanol's benefits more clearly than before, and aiding indirectly the publication of dozens of anti-tariff editorials in major US newspapers.
The US Congress, now in recess, will return on September 14. Progress on the ethanol debate is doubtful between now and US elections on November 2, Velasco said. That leaves roughly eight weeks on the calendar before year's end for Congress to work up and pass a ethanol tariff renewal, or an entirely new format to tax and manage the ethanol supply.
The ideal turnout would be for the US$0.54-per-gallon tariff on Brazilian ethanol to expire completely, Velasco said, but he questions whether Brazilian producers are truly ready to take advantage of a suddenly wide-open US market. Brazil's domestic demand is growing steadily each year, and foreign investment in new Brazilian mills hasn't fully recovered to levels before the world economic crisis.
"Are we really prepared to have this product available as needed?" Velasco said. "Industry expansion here would have to be enormous, and immediate."
A similar opportunity for Brazilian ethanol may be had in India, a market struggling to meet its own minimal need of a 5% ethanol mix, started this year. India is simply out of free farm land to expand sugarcane production for ethanol, and faces the unpopular choice of needing to cut other crops if it wants to grow more cane, said J. K. Tripathi, consul general of India's consulate in Sao Paulo.
In addition, ethanol is costly to produce in India, 1.5% as costly to produce as it is in Brazil, Tripathi said. Indian producers will continue producing sugar first, while the ethanol program focuses on molasses as its main feedstock. How India will meet a 20% mix goal by the year 2020 if reliant on domestic production is hard to imagine.