Brazil ups alcohol in gasoline to 22 pct on May 31
Date: 24-May-01
Country: BRAZIL
"The final step to approving the increase to 22 percent happened today when the Interministerial Council on Sugar and Alcohol sent the decree to the National Council on Farm Policy," said Pedro Camargo Neto, the Agriculture Ministry's secretary of production and trade.
Brazil's gasoline had contained 24 percent of the sugarcane-based ethanol, or alcohol as it is referred to locally, but the government had to reduce the ratio of the clean-burning fuel in gasoline four percentage points late last year.
A prolonged drought over Brazil's main center-south sugarcane crop cut the region's output by 20 percent and the government feared the consumption of alcohol at the time would create sharp price fluctuations and supply problems on sugar and alcohol markets.
Brazil launched its "Pro-Alcohol Program" in the early 1970s during the world energy crisis to ease its dependency on foreign oil imports while bolstering demand on the country's sugar market.
This season's center-south crop was pegged between 222 million and 227 million tonnes, well above the 207 million turned out during the 2000/01 drought-stricken season.
But a shortage of rain in January and March in certain top-cane-producing regions of the Center-South have raised concerns that the harvest figures may tend toward 222 million tonnes rather than the upper end of the estimate.
The government has responded conservatively at this point while production figures from the field - only recently having begun harvest - are still pending, said a sector analyst.
But a sugar trader based in Rio de Janeiro said the move to raise the mixture to only 22 percent had been widely expected for a month now and the market has already factored it into prices.
"The two-point rise of alcohol in fuel will translate into about 500,000 tonnes of sugar taken off the market," said the trader, a specialist in alcohol production, who declined to be named.
He added that many of the country's smaller gasoline distributors already cut their gasoline with levels of alcohol well above the government's mandated 20 percent level.
"These smaller chains account for about 50 percent of the country's distributors, so the impact of the two point increase on the sugar market will be somewhat mitigated," he said.
After extracting the liquid from the sugarcane by crushing, mills distill some of the cane juice into ethanol and the rest is used for the production of sugar.
Residents of Brazil now should breathe better during the Southern Hemisphere's winter months when pollution tends to worsen in larger cities like Sao Paulo due to inversion problems. Alcohol is a renewable bio-or green fuel and is said to burn 10 percent cleaner than gasoline.
