South America Calling

Brazil Set To Raise Ethanol Mix

Brazil's government is expected to raise the percentage of ethanol in gasoline fuel this month.

For the first time, ethanol will account for 27% of gasoline fuel, up from the current level of 25%.

The decree enacting the change is on President Dilma Rousseff's desk, awaiting her signature, according to government sources quoted by Folha de S. Paulo, a local daily.

The move will increase domestic demand for ethanol by around one billion liters (264 million gallons). Last year, Brazil produced 26 billion liters (6.9 billion gallons).

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Local ethanol is produced from sugarcane, a crop that has been badly hit by the dry weather in Brazil's Southeast. As a result, the Center-South's last harvest was 5% down at 567 million metric tons.

The dry weather, allied with tighter credit, meant cane replanting dropped 15% in 2014, which will limit cane production potential for the 2015-16 season (cane is typically grown on a five-year cycle with cuts every 12 or 18 months).

The reduced availability of ethanol meant exports fell by half to 1.4 billion liters (370 million gallons) in 2014, with half that going to the U.S.

With even less ethanol likely available in 2015 due to the ethanol mix hike and the possibility of another small crop, it will be difficult for shipments to recover.

Brazil's Center-South harvest runs from April till December. In the recently completed cycle, some 43% was used to produce sugar and 57% was used for ethanol.

The ethanol is used either as an additive to gasoline fuel in anhydrous form or as a biofuel in hydrous form.

Ethanol accounted for 38% of car fuel supply in 2014.

(CZ)

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