CHICAGO/SAO PAULO (Reuters) – U.S. ethanol exports
to Brazil will spike during the coming months as high gasoline
prices and low ethanol supplies drive up demand in the South
American country, according to two traders and two brokers
active in the market.
The southward flow comes as a setback to Brazil’s efforts to
curb foreign shipments. Its government in September slapped a 20
percent tariff on U.S. ethanol imports above a quota of 150
million liters (40 million gallons) per quarter but is
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Sales of U.S. ethanol to Brazil so far in January would
already surpass that quarterly quota, said a U.S. fuel trader
with direct knowledge of the deals.
“Even with the 20 percent tariff, the arbitrage is pretty
wide open into the northeast (of Brazil). They are going to keep
pulling because they need the barrels,” the trader said.
Tarcilo Rodrigues, a partner at Bioagencia brokerage in Sao
Paulo, said U.S. producers could ship as much as 450 million
liters of ethanol in the December-January-February quarter –
triple the quota and roughly matching record-large volumes seen
in the same period a year ago.
“I believe this is a situation that will persist at least
cane crop and local ethanol prices tend to fall,” Rodrigues
said.
Brazilian brokers quoted U.S. ethanol delivered at local
ports at around 1.95 reais per liter ($2.29 per gallon) after
transportation costs and all taxes and the 20 percent import
charge. That is cheaper than similar Brazilian product, pegged
at around 2.15 reais per liter ($2.53 per gallon).
U.S. corn-based ethanol futures on Thursday of $1.34
per gallon have recovered from the decade-low of $1.25 hit last
month.
Brazilian gasoline prices are up more than 20 percent since
July due to rising oil prices. That boosted demand for cheaper
ethanol as a substitute. But since Brazil is between cane crops,
most local mills will not produce more ethanol for a few months.
Martinho Ono, a director at Sao Paulo-based ethanol
brokerage SCA Etanol do Brasil, said some sugar and ethanol
makers in Brazil are converting anhydrous ethanol – the type
primarily produced in the United States – into the hydrous
variety more common in Brazil.
So-called flex-fuel cars in Brazil operate on gasoline or
hydrous ethanol.
