In Brazil, UNICA, the ethanol/sugar mill owners trade union, says 2009 was a terrible year for them. Tell that to car owners facing ethanol prices at more than 80% the price of gasoline in most of the country. Brazilian ethanol, made from sugarcane, is uneconomical when it is more than 70% the price of gasoline.
“Even so, there is no risk of negative effects on ethanol production because of high sugar prices on international markets,” says Antonio de Padua Rodrigues, the Technical Director at UNICA.
Translation: Mr Rodrigues claims that mill owners are not making sugar instead of ethanol and are not selling sugar on international markets where the price is the highest in 30 years instead of selling ethanol on the Brazilian domestic market.
In short, the mill owners ain’t misbehavin’. And they have a lot to say about other negative effects on ethanol production, but not much about the negative effects of ethanol prices at the gas pump.
In 2009 expectations were that producers would crush 580 million tons of sugarcane but only 530 million tons made it to the mills. And there was the additional problem of lower yields due to high levels of humidity in the sugarcane, which reduces saccharification – the production of sugars in plants. Rodrigues says the loss was some 10 kilos of sucrose per ton of sugarcane.
Rodrigues gets dramatic as he describes 2009. “It was tragic. Lots of negatives for our sector. The international financial crisis dried up credit and producers had no money just when they needed it desperately for cash flow.
“The only way to sustain cash flow was by selling our produce and that pushed prices way down between April and September. Then the harvest was hit hard by too much rain – the highest levels of rainfall in 30 years – and just as demand rose supply dropped. Result: prices exploded in November.”
UNICA admits that the price of ethanol at the gas pump in January 2010 was 110% higher than it was in April 2009! Even so, they promise that 57% of sugarcane production in Brazil will continue to be crushed for ethanol.
As for 2010, Rodrigues says that with credit available on the market now and changes in ethanol commercialization processes being implanted, including a futures market, there are good business opportunities for everybody in the sector.
It is not quite clear, however, what good opportunities will be available for the drivers of Brazilian-made flexfuel cars in 2010.
