Ethanol prices surge in Brazil, raise prospect of limited exports

Rio de Janeiro (Platts)--7Apr2006

Pump prices for ethanol in Brazil surged 14.2% in March, their biggest
one-month leap in more than three years, as supply concerns in the months
between sugarcane harvests and rising demand from flex-fuel vehicles boosted
prices, according to Brazil's monthly FGV inflation survey, released Friday.

Higher domestic prices and supply concerns here have prompted the
government to consider restrictions on ethanol exports this year, which could
affect supply to the US.

Brazil's government last month warned sugarcane ethanol producers it
could rein in their exports if domestic prices kept rising. At the beginning
of April, a liter of ethanol costs on average Real$2 ($0.93) at the pump in
Brazil, versus about Real$2.60 ($1.20) for gasoline, according to federal oil
and fuels regulator ANP. Flex fuel cars, which now make up about three fourths
of new car sales, can run on either sugarcane ethanol or the country's
customary gasoline mixture, which itself contains 20% anhydrous ethanol.

While analysts expect about a billion liters of new ethanol to hit the
domestic market this month, it remains unclear how much of Brazil's ethanol
production may be destined for exports. The country shipped about 2.4 billion
liters of its 15.4 billion liter production abroad last year. And analysts
said Brazil may consume more than 14 billion liters of the 16 billion liters
it plans to produce this year.

Venezuela, India, Nigeria and other countries may compete with the US for
Brazil's ethanol imports. A group of US Senators began an official visit to
Brazil on Friday to learn more about Brazil's ethanol program, visit its
sugarcane mills and hold talks on ethanol with Brazil's Development and
Industry Minister Luiz Furlan, the government news Agencia Brasil reported.
The names of the politicians were not immediately available.

Furlan plans to travel to Japan next week to discuss exports of ethanol.
In a statement Friday, the ministry said Furlan will meet with government
officials as well as representatives from the Japan Bank for International
Cooperation and Itochu Corp.

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