Brazil to create ethanol reserves

Jan 24, 2010 01:00 AM

Brazilian state development bank BNDES plans to establish a credit line of 2.5 bn reais (about $ 1.37 bn) to create ethanol reserves to deal with future shortages and spikes in the price of the alternative fuel, Agriculture Minister Reinhold Stephanes said. The reserves will help stabilize Brazil's ethanol market, which has seen prices rise in the wake of heavy rains that affected the sugar harvest, Stephanes told.
"Starting in April or May, the market should normalize and it is believed that there will be more than enough ethanol, even if sugar demand remains strong, to create reserves, since there will be excess production," the agriculture minister said.

The price of ethanol has risen by nearly 6 % in recent months, forcing the government to order a reduction in the ethanol-gasoline mix used in Brazil. As of Feb. 1, the percentage of ethanol mixed into gasoline will drop from 25 % to 20 % for 90 days.
Ethanol, made from crops such as sugar cane and corn, is basically grain alcohol. The alternative fuel is usually mixed with unleaded gasoline and can be pumped into vehicles at existing service stations.

Brazil, the world's largest producer and No. 1 exporter of ethanol made from sugar cane, has weighed importing corn-based ethanol from the United States because the price on the US market makes it more profitable than the domestic product.
"At this time, for example, everything indicates that, with the price ethanol hit, it would be worth it more to import. I believe that the duty (of 20 % on ethanol imports) should be lifted. If the price goes up more, the market could then import" the fuel, Stephanes said.

The issue will be discussed at a meeting among Stephanes, Finance Minister Guido Mantega and Unica sugar cane industry trade association representatives.

Source / EFE
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