CEIC Data Blog

Soaring Brazilian Imports of U.S. Ethanol

 

CEIC Brazil Data Talk: Brazil’s surging ethanol imports from the U.S. in 2010 have been causing concern for Brazil’s domestic biofuel industry, especially given its status as the world’s largest exporter of ethanol fuel. Statistics from the U.S. Commerce Department show that Brazil imported 70 million litres of ethanol from the U.S. in 2010, an enormous increase from 1 million litres in 2009. The increase of U.S. ethanol imports to Brazil have been attributed to a confluence of factors, including both the sharp appreciation of the Brazilian real and rising sugar prices.

Movement of Sugar Export Price and USD Against the Brazilian Real
Brazil Sugar Exports
Chart provided by: CEIC Data

The Brazilian real has appreciated against the U.S. dollar since the second quarter of 2009. This meant that Brazil’s ethanol exports are comparatively more expensive, hence reducing the competitiveness of Brazil’s biofuel industry in the world market. In addition to the appreciation of the real, high ethanol prices have also been attributed to the rising of sugar export prices in Brazil. The poor harvest of sugarcane since late 2010 has resulted in a shortage of the sugar supply in the market, leading to rising of sugar export prices.

At the same time, growing flexible-fuel vehicle sales have resulted in strong domestic demand for ethanol fuel in Brazil. However, as domestically produced ethanol fuel is insufficient to meet the demand; this has resulting to the necessity in increasing imports of ethanol fuel from the U.S. While Brazil remains at the forefront of the global biofuel market, these supply-side and demand-side issues threaten to dethrone Brazil as the world leader. This is exacerbated by the structural nature of these issues, which are not easily resolved by short-term government policies. Continuous monitoring and applying suitable measures may remain major tasks for the Brazilian government.

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