Oil Report

Brazil's ethanol exports to rise in 2008:F.O.Licht

SAO PAULO, March 5 (Reuters) - After a sluggish performance in 2007, Brazilian ethanol exports could rise again this year as the cane-based fuel remains more competitive than ethanol made from grains, analyst F.O. Licht said on Wednesday.

Moreover, growing demand in top importers like the United States and the European Union should help boost Brazilian exports.

“There’s a good chance total Brazil exports reach 4 billion liters in 2008, compared with around 3.5 billion last year,” F.O. Licht Managing Director Christoph Berg told reporters after a presentation at a seminar in Sao Paulo.

He said cane-based ethanol production costs fell 4 percent last year compared with 2006, pushed down by sugar prices, while corn ethanol jumped 45 percent and wheat ethanol costs increased 43 percent. Gasoline costs rose 16 percent at the same time.

“The competitiveness of the Brazilian ethanol rose dramatically,” Berg said, adding that sugar complex could possibly have reached a floor while grains may have already peaked.

He estimated production costs this year to rise 10 percent for sugarcane ethanol, 5 percent for corn ethanol and 15 percent for wheat ethanol. Gasoline production costs would rise 10 percent.

He said analysts predict 24 billion to 25 billion ethanol output for Brazil next crop, while domestic consumption is put on average at around 20 billion liters. This gives the country a higher ethanol surplus that could be exported.

The United States is expected to remain Brazil’s largest market abroad, with imports totaling 2.1 billion liters. Direct sales would likely grow by between 200 million and 700 million liters from 500 million liters in 2007.

And around 1.3 billion liters would be exported through the Caribbean.

Under the Caribbean Basin Initiative trade pact, ethanol that is reprocessed in the region and re-exported to the U.S. market is exempted from a 54-cents-a-gallon import tariff imposed to direct shipments.

Brazilian ethanol exports to the European Union are forecast at 1.2 billion to 1.3 billion liters, compared with around 1 billion liters in 2007.

Berg said world ethanol production could rise to 70 billion to 75 billion liters this year, with demand likely matching supplies. He gave no comparative figures. (Reporting by Inae Riveras; Editing by Christian Wiessner)