Vinicius Konchinski Reporter Agência Brasil

São Paulo – The sugarcane harvest has begun and although it is expected that production this year will be less than it was in 2010, the price of ethanol should begin to fall soon. According to mill owners and distributors, the price of ethanol will be competitive again only in May [to be competitive (economical), ethanol cannot cost more than 70% of the price of gasoline].

Spokespersons for the Sugarcane Industrial Union (“Unica”), have announced that total 2011 production of ethanol will reach 17.2 billion liters (that is down from over 23 million liters in 2010).

“Ethanol will be produced and it has to be sold. The price at the pump must come down so the consumer will buy it again,” declared Antonio de Padua Rodrigues, a director at Unica.

Meanwhile, the president of Unica, Marcos Jank, was also positive about a drop in ethanol prices. “The price will come down, probably within 45 days,” said Jank. “And it must come down to where it is once again competitive. It should be less than 70% the price of gasoline in May when supply will catch up with demand. That is when people will once again fill up with ethanol.”

However, the executive vice president of the distributor’s union (“Sindicato Nacional das Empresas Distribuidoras de Combustíveis e de Lubrificantes (Sindicom), Alísio Vaz, says that as this year’s supply of ethanol will be less than in the past, the result will be ethanol prices that are competitive for a shorter period of time in 2011. In other words, supply will barely catch up with demand – and only for a short time.

Unica has also expressed concern with future supply problems (in the face of sharply rising demand as Brazil sells more and more fuel-flex cars that can run on gasoline and ethanol). Unica, which represents 60% of the ethanol/sugar mills in the country, points out that the production of ethanol has become less attractive for the mills because their ethanol must compete directly with gasoline that has its price set by the government at artificially low levels.

Jank says mill owners are investing in the production of sugar rather than ethanol [at the moment, sugar prices are at historical highs]. Jank adds that Unica is negotiating a pact with the government for funding to expand sugarcane production and create credit lines for more investment. He says that otherwise lower ethanol production between now and 2020 is almost certain.

“Investments in our sector dried up after the 2008-2009 international financial crisis. We are currently talking to the government about a broad-based, large-scale plan to reverse the tendency toward a reduction in ethanol use,” declared Jank.

Allen Bennett – translator/editor The News in English

Link - Preço do etanol só deve cair em maio, segundo usineiros e distribuidores