Our site uses cookies to facilitate your visit. By continuing, you agree to our use of cookies.

Cookie compliance notification

List of Cookies used on Argus Media

Analytics Cookie

These cookies allow us to count page visits and traffic sources so we can measure and improve the performance of our site, using a service provided by Google Analytics. The analytical cookies are non-intrusive, which explains why they are already set when a user accesses this website.

Cookies used: __utma, __utmb, __utmc, __utmz, __SC_ANALYTICS_GLOBAL_COOKIE, __SC_ANALYTICS_SESSION_COOKIE

Compliance Cookies

This cookie is placed if you click the Hide button in this message. It tells us you have read the message and stops this message from displaying.

Cookies used: CookieLawCompliance

Functional Cookies

These cookies are used to enable core site functionality like login and logout. They do not contain any personal information and are automatically deleted when you close your browser.

Cookies used: ASP.NET_SessionId, ARGUSFORMONLINE, SITELOGIN

Brazil boosts financing for ethanol industry

27 Feb 2012, 1.36 pm GMT

Brazil boosts financing for ethanol industry

Sao Paulo, 27 February (Argus) — The Brazilian government is seeking to reinvigorate the country's ethanol industry by providing around 65bn reals ($38bn) in financing as part of its 2012-15 ethanol expansion plan

The agriculture ministry laid out specific goals, including the return to a 25pc blend of anhydrous ethanol in gasoline and hydrous ethanol holding a 50-55pc share of the gasoline market. Pure hydrous ethanol is sold at retail stations to the country's growing flex-fuel car fleet.

The funds would be disbursed by national development bank Bndes through intermediary financial institutions including Banco do Brasil, which accounts for most of Brazil's agricultural credit market.

The funds include and are mostly an extension of the R10bn in financing announced in the past months for the sector in 2012.

Output of hydrous ethanol fell by nearly 30pc this past season and investments in new ethanol capacity have mostly dried up since the 2008 financial crisis.

If mills and cane growers fully utilise the financing available, it could lead to a more than a 50pc expansion of the roughly 8mn hectares (80,000km²) under cultivation with sugar cane by 2016, according to government estimates.

The financing is directed to four specific areas. First is the expansion and renewal of cane fields to make full use of the roughly 150mn t/yr production capacity surplus of the sugar and ethanol industry. At present, millers have far more capacity to crush and produce than there is cane available on the market. A total of R8.5bn will be allocated to this purpose and could lead to the expansion of cane area by 1.4mn hectares.

Second is the expansion of cane area to meet projected growth in demand for ethanol domestically and overseas. The government is allocating R23bn for this purpose, which could bring an additional 3.8mn hectares into cane cultivation.

A third area, which will receive R29bn in financing through to 2015, is the renewal of older cane fields from which yields have dropped sharply. The funds if utilised would result in the replanting of 6.4mn hectares.

Lastly, the government will put R4.5bn towards building ethanol stockpiles, seen as essential to keep prices from spiking during the inter-harvest period.

The ministry expects the financing to stimulate private-sector investment. Although the sector has applauded the government's longer term commitment to the ethanol sector, production of the biofuel still remains uncertain because of government policy toward gasoline prices and heavier regulation of the ethanol sector.

The government has held domestic gasoline prices below international prices for more than half a decade, while production costs for ethanol have risen steadily, making the biofuel less profitable, especially for hydrous ethanol.

The national monetary council of the finance ministry will need to approve the financial package before it can be made available.

Send comments to feedback@argusmedia.com
ej/dt 2.4



If you would like to review other ArgusMedia.com content options, request more information about Argus' energy news, data and analysis services.

Copyright © 2012 Argus Media Ltd - www.ArgusMedia.com - All rights reserved.

View more news articles