Ethanol shortage in Brazil causing prices to soar

Brazil's ethanol prices have soared to levels rarely seen, rising 65 percent over last month's prices and hitting $6.31 a gallon, more than double the amount the biofuel was selling for during this same time last year. Since Brazil blends its gasoline with a mandated 25 percent ethanol, the rising cost of the biofuel can significantly affect pump prices.

Brazil's ethanol supply tightened significantly in the first quarter of 2011, following the end of the sugarcane harvest last December. Ethanol prices are not expected to drop until mid-May, when supply from Brazil's current sugarcane harvest begins to enter the market.

So, in stepped the U.S. Sources say that some 200 million liters (52.8 million gallons) of ethanol exported from the U.S. arrived in Brazil recently. U.S. shipments of the biofuel could put a cap on the upward price trend of ethanol in Brazil, but the South American nation does not expect that imports will drive down prices.

[Source: ICIS | Image: cliff1006 – C.C. License 2.0]

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