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Blog Beyond Brics - Financial Times (UK)

Brazil’s ethanol production in focus

Publicado em 12 maio 2011

Por Iona Teixeira Stevens in São Paulo

Sir John Beddington, chief scientific adviser to the UK government, might not have realised it but his visit to Brazil this week came at a crucial time for the Brazilian ethanol market.

At a conference on climate change, Sir John reminded those present that “Brazil is the largest producer of research in agricultural science … and is the world leader in bio energy”. Ethanol accounts for about half the non-diesel fuels market in Brazil.

But recently, Brazil’s ethanol market has been struggling due to a delayed sugarcane harvest, forcing it to import a significant amount of biofuel from the US. With ethanol prices rising, it has raised questions once again about the viability of biofuels in a world that increasingly needs to till land for food.

Indeed, when asked about the viability of sugarcane ethanol in Brazil in view of rising global food prices, Sir John recalled the food price spike in 2007/2008 when the increasing diversion of maize production into fuel contributed to food inflation around the world. Although ethanol from sugarcane is highly efficient, Sir John was emphatic on the importance of pushing ahead with research into second generation biofuels, that is, those that do not use agricultural produce but waste instead.

But Carlos Brito Cruz, scientific director of Fapesp, a research funding institution in São Paulo with which Sir John signed a research funding agreement on behalf of UK universities, countered that Brazil is so vast, agriculture in the country could continue to serve both masters – food and fuel. Agriculture, he said, “uses only 0.6 per cent of total land area” of Brazil. According to the Brazilian Ministry of Agriculture, there has been a steady productivity rise in sugarcane crops since the seventies, increasing to 77.5 tonnes per hectare in 2008 from 46.8 per ha in 1975. Fapesp argues that this has been an R&D-driven increase.

Such arguments, however, do not take into account financial factors. The rise in productivity of Brazil’s ethanol industry has been counterbalanced in recent years by the rise in strength of the Brazilian currency, the real, against the dollar. This helped contribute to the increase in US ethanol imports last year.

For now Brazilians are waiting for the increased supply in ethanol typically brought about by the May sugarcane harvest season, which should help to reduce fuel prices. In addition, the Brazilian government is pressuring state oil company Petrobras to lower ethanol prices. But governments everywhere would do well to heed Sir John’s recommendation for more research on second generation biofuels. Without more research, Brazil and the world will not be able to fully realise the promise of ethanol to alternative energy.