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jrsiajdranch
Veteran Advisor

Hey guys some good news from Brasil

Well this is interesting. Just thought I would brighten up the corn farmers moods today. Enjoy.

 

Exclusive - Sugar-squeezed Brazil buys US ethanol

The scarcity of sugar products in Brazil, the top producer, has led the country to turn to the US for corn-based ethanol to replenish depleted supplies of its own cane-based alternative, Agrimoney.com has learned.

Brazil's North East region has, in an unusual if not unprecedented move, begun importing US ethanol to replenish supplies lost as soaring sugar prices encouraged mills to turn cane into sweeteners rather than biofuels.

The move defies typical industry dynamics which, as sugar ethanol is less energy-intensive to manufacture than America's corn-based biofuel, typically makes Brazil's version significantly more competitive.

"We have to convert our corn into sugar first," Don Roose, president of broker US Commodities said.

'Tight window'

However, the figures for Brazilian imports of US ethanol stacked up, even including a trade tariff of $0.54 a gallon, Mr Roose added.

And the trade was confirmed by a leading industry figure, who said that such imports had begun to make financial sense last month, and looked likely to continue to do so until April, when the country's own production resumes in earnest.

"A tight window is there to pull in some ethanol from the US," the source told Agrimoney.com, on condition of anonymity.

The imports were a sign of the unusual dynamics occurring within the sugar industry, whereby countries such as Argentina, Australia and South Africa, typically exporters, were seeking foreign supplies.

"People are finding they have oversold themselves, and so have to go outside to make up supplies. Strange things are taking place."

Ethanol vs sugar 

The clamour for sugar has increased to 44.7%, from 42.9% in 2009-10, the proportion of cane converted into the sweetener rather than ethanol, the International Sugar Organization said earlier this week.

"In a nutshell, although the final figures for both cane production and industrial yields proved to be lower than previously expected, this has not affected sugar production as the decrease in cane availability has impacted ethanol rather than sugar output," the ISO said.

While sugar production is up by 15.1% this season, "the growth rate for ethanol output has been downgraded to 6.6% as against nearly 13% projected in November".

The financial incentive was evident in January when, for instance, Brazilian hydrous ethanol sold at the equivalent of 17.8 cents a pound, compared with 45.4 cents a pound for crystal sugar.

"The premium of sugar over ethanol prices throughout the season incentivised mills to allocate as much cane juice as possible towards sugar production," merchant Czarnikow said on Tuesday.

For the US, ethanol exports even to Brazil looked a supportive factor, showing there is a "world market out there" for the corn-based version, Mr Roose said.

'Sugar is tight' 

However, expectations that Brazil might switch more cane into ethanol production, given higher oil prices, were attributed with sparking a 3.7% rise to 30.35 cents a pound in raw sugar, for May delivery, in late deals in New York.

White sugar for May closed up 3.7% at $760.50 a tonne in London.

"Sugar is tight, [and] will remain tight for the coming quarter until Brazil begins its harvest," Nick Penney at Sucden Financial said.

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15 Replies
marketeye
Veteran Advisor

Re: Hey guys some good news from Brasil

jrsiajdranch,


Just got off the phone with Don Roose.


He says, "There's only so much ethanol to go around, with the U.S. mandates for ethanol use. So, it will help with our blending wall issue. As sugar competition grows for ethanol production, you may see this on-again-off-again pattern of buying. But, I don't see it as any big trend. There are certain times when it works. But, you don't know."


Thanks for posting that story.


Mike

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k-289
Senior Advisor

Re: Hey guys some good news from Brasil

Well JR what an article --kinda think it enforces some of the take care of "US" instead of being feed this B--- Stuff about how "cheap" things can be done "off shore" and it's "vudue" !

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jrsiajdranch
Veteran Advisor

Re: Hey guys some good news from Brasil

The thing that hit me about it was this. What if the E industry had put on its big boy pants and done away with the blenders credit and the tarriff instead of sucking up to the big gov. sow?  How much sooner would Brasil have put American E into their mix?  How much more of an impact would that have had on e in the US?  Maybe I should be glad they didn't have the fortitude to go it alone?

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Palouser
Senior Advisor

Re: Hey guys some good news from Brasil

My understanding is that US ethanol has been shipping to Brazil for some time. It is also my understanding that one of the reasons is the changing price of sugar which enticed more Brazilian cane  INSTEAD of going for ethanol. So, the argument that this could have been accomplished all along is probably flawed. The situation may change again.

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corn_man
Friend

Re: Hey guys some good news from Brasil

I have been asking myself the same thing regarding the oil industry.  Can you say the oil drilling act of 1913?

 

I actually hope it all goes away, corn goes to $15, and gas goes to $12.  Then food will be about 400% of what it is -- like in the UK.

 

At least then I won't hear all this whining about susidies .... and that crow you are having goes good with what ?

 

Be careful what you wish for .......

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corn_man
Friend

Re: Hey guys some good news from Brasil

By theway, I am pretty sure that the smarites in Brazil have been shipping it in via the Caribbean channels anyways, avoiding all the tariff.

 

http://www.econbrowser.com/archives/2007/03/caribbean_ethan.html

 

Too bad the US didn't have a channel like that, we still have to pay 54 cents, another good trade move.

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corn_man
Friend

Re: Hey guys some good news from Brasil

After re-reading this it makes quite a bit of sense who is really valued in this country ... or at least who has better lobbyists.  Of course $40 billion a year in oil subsidies from the government can buy you a lot of lobbyists !!!!!!!

 

I do remember my grandpa talking about time when farmer has more power, and food was actually protected and cherishish. 

 

I wonder what kind of pesticides China's EPA has approved .... wait, they don't have an EPA do they ?

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k-289
Senior Advisor

Re: Hey guys some good news from Brasil

Just ask the home builders in Florida about China and the "CHEAP" not so dry-- dry wall  ?

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jrsiajdranch
Veteran Advisor

Re: Hey guys some good news from Brasil

Hey guys I was poking a little fun here,  I thought it was an intersting article. I do not believe it is a trend other than a spot one at times.  Makes you realize how tight the world stocks are. ALso shows that corn someday might be to expensive to make E out of.  

Farming is way harder than it used to be. Starting to make my head hurt! HE HE

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