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Ethanol demand begins to tip the food/fuel balance in Brazil

According to Bloomberg, C. Czarnikow Sugar Ltd. says that Brazil may find it difficult to meet its own ethanol demands for the crop season ending in March. The problem isn't an issue of production capacity. It's because global demand is on the rise and higher prices outside the country are encouraging exports.

If Brazil is indeed in danger of falling short of meeting its domestic ethanol demand, it's likely that more of the country's sugar crop will be diverted into ethanol production. As a result, Brazil may raise the percentage of harvested sugar that is diverted towards fuel from 48 to 49 percent this year.

Unless you're a sugar trader, these facts or figures won't send you into any sort of scare. What does make the article interesting to us, though, is that Brazil is now at a near 50/50 food/fuel balance which is often a sort of mental tipping point. If the trend of ethanol demand continues to rise, the balance will for the first time be shifted towards fuel. Just some food for thought.

[Source: Bloomberg]

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