Brazil Ethanol, Biodiesel News

In its last story in the series about ethanol, the Jornal Nacional News heard Brazilian specialists and government officers about what matters most to the country's drivers: price of fuel. Reporter Julio Mosquéra shows that 2012 will still be a year of many problems. One behind the other cars enter and leave the gas station, but the ethanol pumps are avoided, and do not sell a drop of this fuel. Price is discouraging.

In 2009, ethanol was the choice fuel for more than half of the Brazilian fleet. Last year only 42% used ethanol. The Federal Government however has warned consumers that until the beginning of 2014, the price of ethanol should remain high. "We shouldn't have cheap hydrated ethanol to stimulate consumption, because the availability [of this fuel] will be short. If the availability is short, there is no way to reduce the price", explains Marco Antonio, Secretary of Oil, Gas and Biofuels of the MME - Ministry of Mines and Energy.

The truth is that the availability is short because the country is not prepared, as it should.

For at least eight years, the market predicted that the sales success of flex-fuel cars would at least double the demand for ethanol. The investment has not been sufficient to meet this demand. "There are lines of credit for this, but there is no interest on the side of investors, entrepreneurs, as there is no clarity in defining the future rules on several issues, such as price, taxation and stocking", says Reinhold Stephanes, former minister of agriculture.

In addition to increasing fuel consumption, cars pollute and jam the streets and avenues all over the country. For specialists, the governments should invest in public transportation. "The model used until today privileging private cars is a model that went wrong everywhere in the world and is wrong in Brazil also", says Artur Morais, professor of the UnB (University of Brasilia).

Only at the end of last year, the Brazilian government approved in Congress a law that classifies ethanol as fuel. It was, before then considered an agricultural product. It received subsidies like a food product without the obligation to comply with rules imposed on strategic energy products. With the change, the Ministry of Mines and Energy will demand from entrepreneurs stocking of ethanol to prevent the lack of product and consequent price increase.

To impose the formation of stocks, the government is offering the producers money at attractive costs, so that they can form such stocks without touching their own capital", says Marco Antonio.

However, how can someone stock products that do not exist? "I like to use the analogy that if I am in debt at the bank, then should I open a savings account? In fact, if it had opened that savings account a few years ago, I could use it now to cover the overdraft.

In reality, we do not have sufficient ethanol, then it is difficult to do any stocking of a product that we don't have", says Edgar Gomes, a professor at USP - University of Sao Paulo. There is another limit: the rule of stocking only goes for anhydrous ethanol, which is mixed with gasoline. The hydrated ethanol that the consumers are buying at the gas stations remains without a clear policy that guarantees a constant offer at a price that offsets shrinking supply. If in future if the country wants to turn into reality the fuel price decrease, it will need to invest US$ 47 billion by 2020, which can no longer be postponed.

Idleness reaches 150 million tons in the country
Folha de Sao Paulo Newspaper, January 8, 2012

The sugar-alcohol sector ended the year 2011 with idleness levels in the Center-South mills of the country, reaching 150 million tons of cane. This means that if there were this volume of cane available in crops in main producer States in Brazil, the mills would be able to process it.

Without sugar cane to produce ethanol and sugar, most mills shut down before the date on which normally activities are completed. An example is Usina Sao Francisco, Sertaozinho, which saw the last truck loaded with cane coming into its patio on September 28, 46 days ahead of schedule, since the mill ends its activities historically in November.

This mill processed 975,000 tons of cane, the smallest volume in the last 16 years. In 2010, the total reached 1.32 million tons. As a comparison, the idleness index in the producing mills of the Center-South region is larger than the full production in the region of Ribeirao Preto, the most traditional industry pole in the country, which reached 148 million tons in 2010. The final data for 2011 have not yet been disclosed. Because of lack of sugar cane, the energy industry saw the effects of the breach on the harvest, with the fall in the number of requests for parts and equipment.

Biodiesel Industry Reduced 10% Use of Soybean
Globo Rural News January 7, 2012

The diversification of raw materials for the manufacture of biofuel prompts this sector to decrease gradually the use of soybean. The percentage of soybean used for industrial production of biodiesel in Brazil suffered a reduction of 10% between January 2010 and October 2011, according to information from Products Handling Information System (SIMP). The reduction, according to the Biodiesel Producers' Union (Ubrabio), is mainly due to the diversification of raw materials for biofuel.

The price oscillations on soybean oil occurring between January 2010 and October 2011, and mentioned on the National Petroleum Agency (ANP) Bulletin, signaling the product drop as a raw material for biodiesel, still confirm it as the main biofuel raw material production. Even with the increasing diversity of grains for the production of vegetable oil, according Ubrabio, soybeans is essential to produce the biofuel in Brazil. According to the ANP monthly bulletin, currently 70% of Brazilian biodiesel comes from soybean raw material.

The reduction in the percentage of soybeans used sounded positively for the sector, since this was one of the expected actions by the Federal Government to move forward with the national program for the production and use of Biodiesel (PNPB). This advance means raising the percentage of mixture of vegetable oil to fossil diesel oil to 7% this year, 10% in 2014 and 20% in 2020. One of the PNPB's assumptions is that the sector manufacturers do not depend on only one commodity to produce the product and that can, according to each Brazilian region, encourage the production of raw materials diversification by family farmers.

These alternative sources would be sunflower, canola oil, castor oil, palm oil and cotton (from the cottonseeds). In 2011, according to the SIMP, the use of cottonseeds oil had 6.35% stake in the industrial production of biodiesel. Until September last year, Brazil was the second largest world producer of biodiesel. From this date, the number of production mills became larger than Germany and that put Brazil in first place. Brazilians also are the main consumers of this biofuel. According to Ubrabio 1.7 billion gallons of biodiesel were produced and marketed in year in the country, an increase of 9% over the same period in 2010.

Despite being a major producer, Brazil still does not export biodiesel, which can change in 2012. At the end of the month of December, President Dilma Rousseff has sanctioned a law (long-standing industry claim), exempting mills from paying two major taxes, PIS/COFINS. Now, the industry hope that by the end of the month of January, the Parliamentary Front for Defense of Biodiesel, led by House of Representative Jeronimo Goergen, introduce planning legislation for the sector.

The above summary reflects the reporting and opinions expressed by the cited news media. Candex does not independently verify information, nor do the reports necessarily reflect the opinion or reporting of the board of Candex.