South America Calling

Brazilian Ethanol Exports Surge, Window Closes

Brazilian ethanol exports have surged in the last couple of months due to the devaluation of the Brazilian real

Shipments totaled 108 million gallons of ethanol in July and August, over double the volume exported in the same period one year before.

With exports also strong at the start of September, it now appears certain that shipments will fall as much as expected in the 2015-16 season (April-March). SCA Trading forecasts exports will equal the 396 million gallons shipped the year before, local business daily Valor Economico reported.

The Brazilian real has fallen 32% against the dollar in 2015, making it the worst performing emerging market currency, which has allowed traders to be super aggressive.

But even if Brazilian ethanol exports attain the level reached last year, that still represents a decade-long low.

Brazil was the world's No. 1 ethanol exporter until 2010 with about 70% of exported product finding its way to the U.S.

However, the Brazilian government's practice of holding down fuel prices to control inflation has limited the amount of ethanol produced from sugarcane, and therefore the exportable surplus, at the same time as ethanol has become cheaper in the U.S.

The pace of shipments may slow down from here on, though, as domestic ethanol prices are on the rise, responding to strong demand -- ethanol fuel sales rose 56% year-on-year in August -- and a jump in sugar prices, which experts predict will cause the window of opportunity for exports to close.

Domestic demand is expected to rise strongly in 2015, in response to a return of taxes and adjustments on the price of gasoline, which will also certainly keep the lid on shipments.

According to UNICA, the Brazilian Sugarcane Industry Association, cane production will rise 3% in 2015-16 to 590 million metric tons, while Brazilian ethanol output will increase 4% to 7.2 billion gallons.



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