Brazil, the world's biggest ethanol producer, may struggle to make enough of the fuel in the crop season ending March to meet domestic use because higher prices elsewhere are encouraging exports, C. Czarnikow Sugar Ltd. said.
Brazil, also the largest producer of sugar used to make ethanol, is expected to export a record 3 billion liters this crop year, from 2.4 Billion liters a year earlier. Exports to the U.S. will rise to 1.2 Billion liters, 130 Million liters more than last season, buoyed by tougher environmental legislation.
As a consequence there is a real risk that Brazilian ethanol production this season could fall short of demand. That may mean more of Brazil's sugar crop will be diverted into ethanol production, reducing global supplies of the sweetener, Czarnikow said. Refined sugar prices rose to a record in London in May, partly on speculation Brazil would use more of its crop to make the alternative fuel.
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Analysts find that there's high possibility that Brazil may not be able to meet the rising ethanol demands for crop season ending in March.
The problem isn't an issue of production capacity. It's because global demand is on the rise and higher prices outside the country are encouraging exports.
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