Brazil has two kinds of sugarcane-based ethanol. There is a pure ethanol. And there is ethanol with water (“álcool anidro”) that is added to gasoline in a 75%-25% blend.
Because of the heavy rains that caused ethanol supply problems between December 2009 and April 2010, the mix of gasoline and ethanol was changed for 90 days (February 1st to April 30) to 80% – 20%.
According to the ministry of Agriculture, the reduction of the percentage of ethanol in gasoline from 25% to 20%, put an additional 100 million liters of ethanol on the market per month, the equivalent of 7% of the 1.4 billion liters that is normal monthly consumption.
At the moment, the 2010 sugarcane harvest is in full swing and it is expected to be a record-breaking one. So, on May 1st, the government announced that gasoline will once again be 25% ethanol.
Meanwhile Petrobras has big plans for the ethanol and biodiesel sectors. In April, Brazil’s state-controlled oil and gas multinational, Petrobras, began producing ethanol, for the first time, at a mill in Bambuí, in the state of Minas Gerais.
This is the result of the purchase of 40.4% of Total Agroindústria Canavieira, the mill owner, by a Petrobras subsidiary, Petrobras Biocombustíveis.
It spent 150 million reais (US$ 83.6 million) at Bambuí and intends to produce 80 million liters there by the end of the year. Then the sugarcane crop area will increase from the present 8,000 hectares to 30,000, and by 2012 the plant will produce 204 million liters.
Petrobras plans to spend a total of 5 billion reais (US$ 2.8) in the ethanol/biodiesel sector between now and 2013, with the goal of producing a total of around 4 billion liters of ethanol by then.
On April 30, Petrobras announced an association with Tereos Participações Internacional in a partnership that will invest 1.6 billion reais (US$ 892 million) in the Açúcar Guarani company, which produces sugar and ethanol.
Petrobras purchased 45.7% of Guarani, Brazil’s fourth biggest processor of sugarcane (at the moment its production is 60% sugar and 40% ethanol). The investment will be made through a subsidiary, Petrobras Biocombustíveis (biofuels), over the next five years.
A spokesman for Petrobras says the intention is to increase production across the board while modifying the production profile to 50% sugar and 50% ethanol during that period.
Guarani has seven mills. One of them, in Mozambique, is of special interest to Petrobras as the company intends to explore ethanol export possibilities.
The 2010/2011 Agriculture Plan will include credit lines for stockpiling ethanol. The fact is that credit was available in the last plan (2009/2010) but, according to the minister of Agriculture, Wagner Rossi, the interest rates charged were too high and there was no demand.
“We offered a total of 2 billion reais, but only 33 million reais were used,” he said. Rossi says negotiations are underway with the Brazilian Development Bank (BNDES) and Banco do Brasil, the main farm sector financing agents, to correct flaws in the plan to create a strategic ethanol stockpile which is now considered a priority by the government.
“We face a problem with ethanol, which is the seasonal aspect of the sugarcane crop. Between harvests prices spike and the market is unstable, creating problems for the millions of Brazilians who drive flex fuel cars. With a strategic stockpile that problem will cease to exist,” said the minister.