March 13, 2012
Raymond Colitt, Stephan Nielsen – Bloomberg, 03/13/2012
Brazil is struggling to make enough ethanol to satisfy domestic demand just as the U.S. scraps restrictions on imports for the first time since 1980.
The U.S., the world’s largest market for the biofuel, on Jan. 1 cut a 45 cent-a-gallon tax credit and a 54 cent-a-gallon tariff that protected local companies from foreign competition. Brazil, the world’s No. 2 producer, is unlikely to be able to take advantage after output dropped 19 percent this season.
Investment in new sugar-cane assets and plantations in Brazil plummeted to $700 million last year, from $7.84 billion in 2008, according to Salim Morsy, an analyst at Bloomberg New Energy Finance in New York. Biofuel investors in Brazil are suffering from bad weather, poor infrastructure and government bureaucracy, said Gerson Carneiro Leao, head of the National Sugar Cane Commission at the CNA agricultural confederation.
January 5, 2012
The Economist – from the print edition, 01/07/2012
“WE’VE been waiting for this news for more than 30 years,” crows Marcos Jank, the president of UNICA, the Brazilian sugarcane-growers’ trade association. The cause of his excitement is the demise on December 31st of import tariffs and tax credits that have long sheltered ethanol distilled from corn in the United States from the same stuff made from sugarcane in Brazil. Now, for the first time, the two countries that produce more than 80% of the world’s ethanol can sell in each other’s backyard at market prices.
Distilling ethanol from tropical sugarcane takes less land and uses less fossil fuel than starting with corn grown in temperate climes. That makes Brazilian ethanol, unlike the pampered and grotesquely wasteful American version, competitive with hydrocarbons and genuinely good for the environment. Most of Brazil’s cars run on a mix of the two fuels. The standard blend contains 18-25% ethanol. Poor weather, and cash-strapped growers delaying their replanting after the 2008 credit crunch, have recently squeezed production—and led to Brazil importing some American ethanol. But in more normal times Brazilian distillers reckon they can supply their home market and export to America at sweet prices.
America’s subsidies and trade barriers were long defended by senators from over-represented, underpopulated rural states (and protected by the fact that corn-loving Iowa holds the first presidential caucuses). But the corn lobby’s influence is waning. Ethanol tax-credits cost $6 billion in 2011: a hard sell in hard times. Corn prices are high, making this a good moment for American corn-growers to start paying for their enormous pickups unaided.