* Unica likely to revise down official sugar forecast to
* Unica expects ethanol exports down 20 pct from yr ago
* Domestic ethanol sales up 24 pct in June on better prices
By Reese Ewing
SAO PAULO, July 16 Ethanol demand in Brazil rose
24 percent in June from a year ago, according to fuel
distributors, signaling a shift among motorists that will help
shrink the global sugar glut and reduce Brazil's dependence on
As a global glut in sugar pushes prices near three-year
lows, Brazil's cane industry association Unica is likely to
revise down its official forecast for sugar output from 35.5
million tonnes seen in April to no more than last year's 34.1
million tonnes, Unica's technical director, Antonio Padua
Rodrigues, said on Tuesday.
Analysts expect growing demand for ethanol on the local
market to absorb the bigger cane crop and draw down the global
Supply of ethanol, which competes directly with gasoline,
has picked up sufficiently on the back of the record sugar cane
harvest. This in turn has weakened the biofuel's price and made
it a better buy for cost-conscious drivers.
The news will be welcomed by state-run oil company Petrobras
which has suffered serious losses from importing
gasoline at international prices and selling it at a loss
domestically due to government price controls.
Rodrigues said that Unica's ethanol forecast for 2013-2014
(April-March) would likely be revised up in the center-south to
26 billion liters from 25.4 billion seen in April.
Fuel distributor's association Sindicom, which accounts for
60 percent of distributors, said ethanol consumption rose 24
percent to 556.6 million liters (4.67 million barrels) in June
from a year ago and rose 10 percent from May.
Sindicom said its associated distributors sold 3.14 billion
liters of hydrous ethanol in the first six months of 2013, which
is up 16 percent from the same period of 2012.
Sindicom's numbers precede the National Petroleum Agency
numbers which have not yet been released for June and may not
exactly match the broader national numbers on ethanol sales. But
they are seen as an early sign of the trend to come.
"Ethanol has begun to regain market share against gasoline,"
Sindicom President Alisio Mendes Vaz told Reuters, attributing
the improved competitiveness of the fuel to the bumper cane crop
and the elimination of the PIS/Cofins taxes on the fuel in May.
With sugar futures prices holding at just above 16
cents/lb, Brazilian cane mills are diverting more production
toward the biofuel.
In June, mills allocated 58 percent of the cane harvest to
ethanol and 42 percent to sugar, while last year they allocated
the crop at 52 percent and 48 percent, respectively, Unica said.
Rodrigues estimates hydrous ethanol sales are up 12 percent
from the start of the cane season in April through June compared
with last year and will end the season in March 2014 up 20
percent from a year ago.
"It's not something that happens overnight," Rodrigues said
about the shift of local drivers to ethanol when its price drops
below 70 percent of gasoline, a reference point for local
motorists that signals ethanol is a better buy.
Ethanol only gets about 70 percent the mileage that the same
tank of gasoline gets in most Brazilian flex-fuel cars.
He added that he expects the local flex-fuel market to
absorb most of expansion in the center-south cane crop that will
grow to a record 589 million tonnes from 533 million last year.
Rodrigues said 50 percent of 350 filling stations surveyed
in Sao Paulo priced ethanol at 64 to 66 percent that of gasoline
and 22 percent priced it at or below 63 percent.
Meteorologists expect July to remain dry after a wet June
slowed the production of sugar and ethanol in the main cane
region. Output of both sugar and ethanol are expected to pick up
in the coming bimonthly crushing reports by Unica.
Although ethanol exports were up more than 100 percent from
January through June in the Trade Ministry's latest numbers,
Rodrigues said he expected exports to fall by 20 percent from
last year's 3.3 billion liters.
"The window for ethanol exports to the U.S. will close
abruptly toward the end of the year as the massive corn crop is
harvested and turned into ethanol there," Rodrigues said.