Fuel price policy mars ethanol outlook in Brazil

Subject

The outlook for the ethanol sector.

Significance

After five difficult years for the Brazilian ethanol industry, the sector has been boosted by an increase in the required percentage of ethanol blend in fuel to 27.5%. However, lower global oil and sugar prices have put additional pressure on the industry in terms of the consumer market, and the price of ethanol looks set to remain volatile. Moreover, low world sugar prices have incentivised producers to dedicate a higher percentage of the harvest to ethanol rather than sugar production.

Impacts

• Controlled retail petrol prices will continue to put pressure on ethanol prices and consumption.
• After 23% growth in 2014, bioelectricity through increased cogeneration will continue to rise.
• The recent renewal of sugarcane plantations will see better harvests in the coming years.