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Brazilian ethanol has proved a mixed blessing for struggling
American corn growers and the carriers who own the trains, ships and trucks
that carry their product this year. The good news is that almost all the
ethanol needed in Brazil (beyond its own production) is imported from the
United States. The bad news is that that amount is predicted to drop in 2019 from
last year. According to the Brazil Biofuels report from the U.S. Department of
Agriculture’s (USDA) Foreign Agricultural Service, which was released on August
9, Brazil will import around 1.2 billion liters of ethanol this year. This is a
495 million unit decrease from last year’s 1.695-billion-liter total. Though
the decline appears precipitous, the amount of the plant-based alcohol that
Brazil will import is well over the 10-year rolling average of around 834
million liters.

Ethanol use in Brazil is expected to grow by 4 percent in
2019 compared with 2018; the estimated figure is 34.45 billion liters, a 1.6-billion-liter
increase. Brazil’s biofuel usage has climbed steadily in the last decade and
last year was no exception. Demand for ethanol in Brazil for 2019 is growing
faster than production, currently estimated at 33.93 billion liters. This
figure represents a 2.19-billion-liter increase from 2018.  But this
production deficit might not last long as over new 40 biofuel plants have
requested certification for 2019. 

Most of Brazil’s ethanol imports from the United States are in
the form of corn ethanol; almost all Brazilian ethanol production is from
sugarcane. Brazil has a total of 370 sugar ethanol factories, which is up one
from 2018. Predicted capacity for 2019 is 43.1 billion liters, which remains
unchanged from 2018. However, most factories rarely work at capacity, because
they can only produce as much ethanol as is proportional to the amount of sugar
they can purchase.

This sugarcane supply for ethanol producers is dependent
upon the usual factors in agricultural production – weather, blight, crop
failures, etc. However, the most fundamental of the unknowns for supply is the decision
by the individual cane growers and the prices they can ask from the ethanol
production facilities compared with other purchasing outlets. In Brazil,
commercial grade gasoline is mandated to contain 27 percent ethanol, which can
place a burden on sugarcane growers but also virtually guarantees a market.

The USDA Brazil Biofuels report is released annually, but the
2019 version is a little different. In December of this year, the country is
scheduled to implement the long-awaited National Biofuels Policy of Brazil,
commonly referred to as RenovaBio. The RenovaBio program was implemented in
December 2016 by Brazil’s Ministry of Mines and Energy (MME). The intention of
the program is to support the nation’s COP21 (also known as the Paris Climate
Agreement) goals, which the country also put in place in 2016. But even
with the organic expansion of biofuel usage and the new mandates that will go
into effect next year through the RenovaBio program, Brazil is expected to
remain a net exporter of ethanol. Brazil is on track to export around 1.8
billion liters of ethanol this year, an increase of around 11 percent over 2018,
which came in at 1.62 billion liters.

Examining a soybean crop. (Photo credit: Shutterstock)

In addition to ethanol, Brazil also is experiencing growing
demand for biodiesel. Biodiesel production in the country has more than doubled
in the past decade. This growth more than covers the country’s demand for the product
leading to virtually no imports since around since 2012. However, Brazil is
also not an exporter of biodiesel. Biodiesel is essentially vegetable oil
produced from plant and animal oils and fats. Brazil is expected to produce
around 5.8 billion liters of biodiesel this year, which is an 8 percent
increase over 2018.

All of this leads back to the U.S. farmer and agricultural
product hauler. Growing ethanol and biodiesel demand in Brazil and countries
like it could lead to further market opportunities for U.S. businesses in the
face of the increasing likelihood that Chinese markets might be off the table. About
70 percent of biodiesel in Brazil is a product of soybeans, which may have to
go to exports to China if the Chinese follow through on their importation bans
against U.S. soybeans. This in turn could provide a market for U.S. soybean
growers in Brazil. Furthermore, as Brazil continues to break new ground on the
use of biofuels in transportation, U.S. transportation regulators are keeping a
close eye. In fact, additional mandates for increased levels of ethanol in U.S.
commercial grade gasoline are predicted to be on the way.

The post Commentary: Does Brazil’s need for ethanol provide greater opportunities for U.S. farmers? appeared first on Logistics Marketing.

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ABOUT THE AUTHOR

Blythe Brumleve
Blythe Brumleve
I've spent more than a decade in print, digital, and broadcasting. Now I help other companies build their online presence by generating leads, gathering insight and growing revenue.

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