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UNICA: Brazilian Ethanol Exports to US Surge Despite Tariff

CattleNetwork. Brazil exported upwards of a record 428 million liters (113 million gallons US) of ethanol in June due to surging demand from the US, according to UNICA, the São Paulo Sugar Cane Agroindustry Union. Exports are likely to increase to 1.5 billion liters (396 million gallons US) by September.

The association now expects to revise up its 2006-07 ethanol export estimates sometime this month from its May forecast of 1.9 billion liters, Unica’s technical director told Dow Jones Newswires.

I think it’s possible that we’ll export 2.5 billion liters (661 million gallons US) this season, even if the US stops buying ethanol after September. I’d say that US demand accounted for over 80% of shipments in June, while direct shipments to the US accounted for over 60%. Exports will be strong until at least September, due to this demand.

—Antonio de Padua Rodrigues

Demand for ethanol in the US has surged given the phase-out of MTBE as an oxygenating additive. (Earlier post.)

The US applies a $0.54 per gallon tariff on direct ethanol imports (although it imposes no duty on ethanol shipped via the Caribbean Basin Initiative (CBI) nations. In 2004, Cargill caused a flap in Congress by proposing to import 63 million gallons of Brazilian ethanol into the US via the CBI to avoid the tariff.

By early July 2006, the price of ethanol on the spot market in the US had essentially doubled to $4.00+ per gallon, while the average rack price was $3.75 per gallon, according to AXXIS Petroleum.

The wholesale price of Brazilian ethanol, by contrast, was $1.79 per gallon (R 1.02706/liter) last week, according to UNICA.

Unica’s estimate for June exports starkly contradicts export registration data compiled by the Trade Ministry and released by the Agricultural Ministry on Thursday, which pegged June ethanol exports at roughly 166 million liters, 38% lower than the roughly 268 million liters registered to be shipped out in the same period last year.

“I’m not sure why there’s such a big discrepancy in the numbers this time around, perhaps it was due to a strike at the export license division,” said Rodrigues. “The data I have right now is that ethanol shipments hit 428 million liters in June, but I think it will be higher than this. We’re still compiling the final numbers.”

Comments

Cervus

At these prices the Brazillian ethanol is actually cheaper than US-made stuff, even with the tariff. So I'm not at all surprised. At least sugarcane ethanol has a good energy return.

John Baldwin

In 20 years we will say - "where has the rainforest gone?"

To make way for ethanol.

Thius is madness

sjc

I would have to see where they grow the cane.
They were cutting forest to make charcoal to smelt iron ore to pay their debts.
Now they clear land to raise cattle for fast food chains.
I think finding the facts before making judgements is a good idea.

Adrian Akau

I hope the soil in Brazil will hold out and not become depleted as happened in Cuba and Papua, New Guiney. I also hope that they will have sufficient water to continue producing since water usage is tremendous for sugar cane and I read that so much of the water from some of the rivers there have been used up that water has been unable to reach the ocean.

It is becoming like some industrial sections of China where the salt water from the ocean flows backward up the river (Guandong province) during high tide because so much of the river water has been used up.

adrianakau@aol.com

allen Z

Actually, the cost of Brazilian cane ethanol plus tariff is not cheaper than US corn ethanol. It is less than the market price for ethanol right now. The sudden switch over from MTBE to ethanol has caused supply to demand ratio to decrease, and increase price. This increased price is more than the cost of Brazilian ethanol plus shipping/handling plus tariff. Thus it is below market price at the exchange, and thus imported to meet demand. If the ethanol production goes up relative to demand, the price will come down, and the Brazilian ethanol importation might slow to a trickle.
_
___As pointed out by Adrian, sugar cane production depletes the soil nutrients. Some are replaced via recycling the waste biomass that contains minerals from the soil. Organic carbon may come in the same way or from compost from sewage treatment or garbage. Fixed Nitrogen is the harder issue because while plentiful, it has to come from certain plants/organisms or synthetic fertilizers. Ironwood tree in New Guinea is one example. In the long term, the already cleared land may be modified and pressed into service as algae oil+ biomass ponds/production facilities. This may reduce the drive for sugar cane fuel, and may produce the requisite minerals/compost for cycled soil restoration on other already cleared land. Thus, the destructioon of the rain forests may stop, or at least slow to a crawl. With farmland soil being revitalized(plus better crops with better yields), there is no need to push farther into the Amazon. Ranchers can grow fast growing grasses, and along with crop leftovers (leaves, stalks, etc) feed their animals without destroying ever more of their ecosystem.
_
___Brazil has enough cleared land already, that if restored and developed, is large enough to provide for their future food, and energy needs. It is large enough for them, if proper management, R&D, and consumption policies are implemented, to export to the world too.

Rafael Seidl

Gents -

Google is your friend. The total area used for grazing cattle is about 120 million hectares, that for growing crops 60 million hectares, of which 5.8 million are for sugar cane and only a fraction of that is used for fuel ethanol. Aver 80% of the ethanol feedstock comes from Sao Paolo and Mato Grosso do Sul provinces, the remainder from the North-East. Overall, the environmental impact of growing sugar cane is no worse than for other crops.

http://www.gronabilister.se/grafik/dynamiskapdf/20060511084611.pdf

Mark R. W. Jr.

Hmm, what if we used genetically modified corn or sugarcane that could be grown in cooler climates or inside greenhouses and required less nutrients but yielded more?

allen Z

Rafael,
While sugar cane is the topic, the issue of crops and ranching are important issues. Due to tropical rains, and demanding crops, the soils are exhausted, and abandoned in cycles. The cycle also cuts down ever more forestsas well. If the soil can be rejuvenated, then the cycle may stop. 26 million acres may be converted into algae, and make enough fuel to equal 9 million barrels a day. That is just from the oil, the biomass left over amy be used as feed/food supplement for the animals, human consumption, biomass fuel raw material, or soil compost source. It has an enormous potential to change Brazil, or any country in many ways that implements something like this.

allen Z

At a relatively conservative estimate of 5,000 gallons/ acre for algae oil. Some estimates have gone as high as 20,000 gallons/acre.

Rafael Seidl

Allen Z -

algae do indeed offer very high yields per acre, but only if there is enough water, sunlight and especially, CO2, to sustain the growth rate. The NREL doc I read about this stated that the really high yields came about in uncovered ponds through which scrubbed and cooled flue gases from a coal power station were blown.

Ergo, while algae ponds on land are an idea that IMHO deserves further development, they are no panacea. Algae farming on the open ocean, covering a much larger area, might be a way to get away from the need for CO2 enrichment. This is particularly true of the North Atlantic, where dissolved CO2 concentrations are highest. The trick would be avoiding uncontrolled algal blooms close to shore.

http://www.bbsr.edu/Labs/co2lab/co2main.html

Paul Dietz

As pointed out by Adrian, sugar cane production depletes the soil nutrients.

It's my understanding that this isn't always the case. Sugar cane has been grown in some places for centuries, with yields improving with time. One recent theory is that this is due to burning of the stubble creating charcoal, which has recently been discovered to be a remarkably effective soil amendment for acid tropical soils.

John Schreiber


My understanding is that CBI sourced BIOMASS is the key to avoiding the tariff. Of course there is also a sugar tariff. So the play is: buy the sugar in the CBI nations and feed it into a Brazilian facility. Its all about the corn belt, and until these folks give up on their misguided idea that corn needs to be subsidized, the earth will suffer.

tom deplume

Algae only need 1 cm of water depth to do their thing. making the ponds any deeper will not improve productivity. One source stated that pound for pound algae used only 10% of the water needed to grow corn or beans.

Roger Pham

Hmm, more and more imports!!! Isn't the trade deficit high enough already? First, crude oil is import, then, not enough refinery capacity, then some gasoline is also imported, and now, even ethanol is imported to improve oxygenated component of gasoline...Ridiculous! Eventually, the USA will run out of money to import stuffs, and the local economy will collapse.


If, however, gradually, the cars in the USA are converted to be able to run on a mixture of methane and hydrogen...then you will first produce hydrogen and methane from gasification of waste cellulosic biomass, and supplement that with coal gasification if necessary (the USA has a lot of coal, you know), and of course, fossil source of natural gas also until solar hydrogen and methane production will come online to displace coal to methane/hydrogen...xTL or cellulosic ethanol or butanol for those wanting liquid fuels...

Hmm, too good to be true? Moving toward ZERO PETROLEUM and ethanol IMPORTATION?

Harvey D.

Switching to liquid ethanol or n-butanol may not be sustainable in North America, (mainly in USA due to large increasing population, on-going love affair with cars and heavy SUVs and reduction in liquid fossil energy availability), unless US residents reduce their per capital liquid fuel consumption to less than 1/4 and even 1/10 the current rate.

Note: Canada does not have the same problem because of huge Oil reserves and much more water and land per capita.

A reduction to 1/4 can be easily be achieved, for personnal transportation, by switching our 15 mpg gas guzzlers for lighter more efficent 60 mpg vehicles. They already exist and many more will be available by 2010.

A reduction to 1/10, from 15 mpg to 150 mpg will be possible with PHEVs after 2010.

Trying to locally produce enough ethanol and n-butanol to replace most liquid fossil fuels without downsizing our vehicles and increasing their efficiency is unreal.

James

If people are that bothered about soil depletion and deforistation they should stop eating meat. Growing food for farm animals is the biggest cause of these.

allen Z

Add smart car pooling too!

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