Ethanol prices need to fall further

Business Reporters
The price of ethanol in Brazil will have to fall below 60 percent of the cost of petrol to encourage motorists to switch to the fuel, according to remarks by consultants Datagro Ltd.
Brazil’s flex-fuel cars can be filled up with either pure ethanol or a blend of the bio-fuel and petrol.
Although price parity is reached when ethanol is at 67 percent to 69,4 percent the price of the petrol blend, since ethanol burns faster, consumers will need even lower prices to switch back to using ethanol, a consultant with Sao Paulo-based Datagro said in an interview last year.

Consumers migrate from one product to the other when the difference is significant.
When prices fall below 60 percent, there is a significant consumer move towards ethanol.

Brazil’s centre south, the main growing region, will break a record 591,5 million metric tonnes of cane in the 2013-14 season started in April, Datagro estimates. Ethanol production will rise to 25,6 billion litres from 21,4 billion litres in 2012-13.

Chisumbanje produces 250 000 litres daily and is targeting to increase production to 350 000 litres daily. Triangle currently produces 740 000 litres per week. About 24 percent of Brazil’s flex-fuel cars are currently being powered by ethanol, down from 82 percent in 2009.

Ethanol prices were 54 percent to 56 percent that of petrol in 2009 and saw many flex-fuel drivers opting to fill up with ethanol.

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