Yesterday, Brazil’s president Luiz Inacio Lula da Silva told Pope Benedict XVI that Brazil will help Africa develop biofuels.
Brazil is  Pope Benedict arrived on Wednesday in Brazil, a world leader in developing ethanol from sugarcane.

Lula told the Pope he wanted to help with reducing African poverty by helping countries there develop biofuels, like ethanol.  Brazil’s ambassador to the Vatican, Vera Machado, said that although the Pope didn’t know much about biofuels, he certainly appreciated any action in support of Africa. Brazil currently has collaboration agreements with African crop scientists in Ghana through Brazil’s Embrapa crop-science institute.

Brazilian officials have said that it is also in the country’s economic interest to help create new ethanol-producing markets in order to expand global trade of the renewable fuel.  Brazil is the world’s only major ethanol exporter.

The O Globo newspaper reports that Brazil’s state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, last week made its first shipment of ethanol to the United States last week.

According to thew publication, a vessel with 12,000 cubic meters of ethanol left the port of Rio de Janeiro for the U.S., and that Petrobas plans another shipment of 20,000 cubic meters of ethanol to the U.S. this month.

Despite imposing an import tax of more than $0.50 per gallon against Brazilian ethanol, the U.S. is Brazil’s top ethanol export market.  Petrobras said it should export around 850 million liters of ethanol in 2007, which includes markets like Nigeria and Venezuela and test volumes to Japan.

The Sao Paulo Sugarcane Industry Association, or Unica, said that it will some time this week (no meeting date had been reported) to discuss potentially increasing the ethanol output from the current 2006-07 sugarcane crop.

 
Unica president Eduardo Carvalho told Dow Jones Newswires that Brazil, the world’s leading sugar and sugarcane ethanol producer, is expected to crush roughly 50% of the cane for sugar and another 50% for ethanol, but low sugar prices and high ethanol demand could see the ethanol mix increase.

 
Carvalho said Unica associates, which are the top executives at Brazil’s main sugar and ethanol mills, would also discuss presenting the government another proposal to raise the ethanol content mix in gasoline from current levels of 23%.  He did not say what the new number could be, but the sector has asked for a 25% mix in the past.

Ethanol prices in Sao Paulo inverted last week’s upward trend and began declining as the 2007 sugar cane crop starts to hit the market, putting an end to the inter-harvest period.

 
Falling prices are normal for the end of the inter-harvest period.  “Prices used to go down between 5% and 10% when the new harvest hits the market,” said Marcelo Andrade, director of Rio de Janeiro-based trading firm Ecoflex Trading.

The price for anhydrous ethanol, a gasoline additive, fell slightly from 1.071 Brazilian reals ($0.52) per liter in the week of April 1-5 to BRL1.070 in the week between April 9-13, according to the Center for Advanced Applied Economic Studies, or Cepea, which publishes local market prices each Friday.

 
The price for hydrous ethanol, a gasoline substitute, continued to fall, from its peak at BRL0.96 during the March 26-30 week, to BRL0.94 during the April 9-13 week.

Sao Paulo is Brazil’s No. 1 ethanol-producing state, accounting for roughly 60% of the country’s total ethanol production. Brazil is the world’s No. 2 ethanol producer, but No. 1 ethanol exporter.

Yesterday, Former Florida Governor Jeb Bush told Brazilian sugar and ethanol business leaders that the U.S. should eliminate its tax on ethanol imports from Brazil.

“The U.S. should remove the tax on Brazil ethanol imports to really get the ethanol market moving,” Bush said of 54 cents per gallon tax.

The president of the powerful Sao Paulo Sugarcane Industry Association, Eduardo Carvalho, told Dow Jones Newswires, “It’s very important that someone like Mr. Bush has this opinion on ethanol. But there is no one person capable of removing tariffs by himself. This is a big political game.”

Bush also said the U.S. should treat ethanol as part of its energy policy, not agricultural policy. Brazil, the world’s ethanol export leader, and the U.S. account for three quarters of the world’s ethanol production.

Brazil’s budding biodiesel program will be more reliant on soy farmers than anyone else, the local Estado newswire reported Monday.

Tamara Dvoskin, a biodiesel specialist from international consulting firm Frost & Sullivan, says that 89% of Brazils current biodiesel production is being made from soyoil. The rest is made from castor and palm seed oils.  Brazil’s biodiesel market will remain local, she says, with small volumes being made available to export. The same model is used for the Brazil ethanol market, where some 3.5 billion liters are exported while 16.5 billion liters are used domestically.

Dvoskin said Brazil is fast becoming a focal point of alternative fuels worldwide, due to its relatively low production costs and technical know-how: “Brazil already has the infrastructure to produce biodiesel, contrary to other countries in Latin America.”

The soy industry has been arguing for the same incentives given small family farmers in the Northeast, who get tax breaks for raising castor beans and palm for biodiesel producers.  “Without these subsidies it would be impossible for Brazil to truly develop its biodiesel sector,” Dvoskin said.

President Bush and Brazilian president Luiz Inacio Lula da Silva met at the Camp David presidential retreat this weekend(for the second time in three weeks) to discuss trade and ethanol.

Pres. da Silva hopes to advance a biofuels alliance and help break a deadlock in world trade talks known as the Doha Round, which were launched in 2001 and stalled last year.  Developing countries were upset because rich nations wouldn’t make significant cuts in farm subsidies and demanded greater access to markets in the developing world.  No major breakthrough on those talks was expected at Camp David.

“What the two presidents want to review is where we are and what needs to be done and what President Bush and President Lula can do to move forward,” said Dan Fisk, the National Security Council’s senior director of Western Hemisphere affairs. 
The two leaders’ talks on ethanol was expected follow up a memorandum of understanding to promote international ethanol that the two nations signed when Bush visited Brazil on March 9.  Fisk said the two hoped to announce a handful of Caribbean and Central American nations that will be the beneficiaries of pilot programs for biofuels development.
Last Friday, Silva reiterated Brazil’s position that the alternative fuel will not gain traction worldwide unless the U.S. drops a 53-cent-per-gallon tariff on Brazilian ethanol: “The subsidies provided under America’s corn-based ethanol program have spurred an increase in U.S. cereal prices of about 80%,” Silva wrote in The Washington Post. “This hurts meat and soy processors worldwide and threatens global food security.”
The promotion of ethanol could eventually help wean the U.S. off its need for foreign oil, officials say, lessening the energy dependence on volatile Middle Eastern nations and Venezuela, whose President Hugo Chavez has long been a political thorn in the Bush administration’s side.
Teaming up with Brazil on the promotion of ethanol, however, hasn’t pleased everyone.  U.S. Corn farmers don’t like the idea of the government helping Brazil’s industry, which they see as a competitor.  Lawmakers from corn-growing states have registered their complaints with Bush.

Farias, a major northeast Brazil sugarcane group, has signed a protocol of intentions with Chinese investors to build ethanol mills that could process up to 10 million metric tons of sugarcane per harvest, according to a report in local Valor Economico newspaper on Monday.

The Chinese companies interested in investing in Brazilian ethanol mills could be Jilin Fuel Ethanol, Henan Tianguan, Anhui Fengyuan Bio-Chemical and Heilongjiang China Resources Jinyu, which together produce 1 billion liters of ethanol per year, said the report. Possible investments could hit 1.2 billion Brazilian reals, with two greenfield projects currently being analyzed in the northeast state of Maranhao, said the report.

The Farias group currently has five operational mills and a new Goias mill expected to enter operation for the 2007-08 harvest. The group crushed roughly six million metric tons of cane last season, and by 2010, the Farias group plans to hit a crush capacity of just under 15 million metric tons; by 2015, the group plans to process 32 million ton of cane.

Cosan SA vice president of finances, Paulo Diniz, said earlier this month that rising prices for ethanol assets discourage acquisitions and may refocus the attention of Brazil’s largest sugar and ethanol group toward organic growth.
“The market is quite heated up in terms of prices…Acquisitions have always been central for our growth,” Diniz said.  He also added that current prices are making the company rethink its strategy: “We have been talking with some potential (acquisition) targets. But we’re (now) evaluating much more seriously internal expansion (of existing distilleries) and greenfield projects.”
Last month, Cosan had lost a bid for the control of Cia. Acucareira Vale do Rosario, the third-largest sugar milling group in Brazil. The company recently reported a net profit of 63.4 million Brazilian reals ($30.3 million) for the quarter ended Jan. 31, reversing a net loss of BRL41.2 million in the same period a year ago.

Silas Oliva Filho, manager of ethanol and oxygenates at Petrobras, said during a sugar and ethanol conference in Sao Paulo yesterday that the Brazilian state-run oil firm would enter the U.S. ethanol market for the first time in 2007 but did not give any volume estimates.

 
The U.S. is Brazil’s top ethanol export market, and Petrobras said it should export around 850 million liters of ethanol in 2007, which includes markets like Nigeria and Venezuela and test volumes to Japan, expected to be around 20 million liters.

 
Filho also said that Petrobas would start construction of a $750 million ethanol pipeline as early as August.  The pipeline will take about two years to complete and have the capacity to transport 8 billion liters of ethanol.  Filho explained that the pipeline “is a big risk for the company, because no one knows for sure when the market will come. It could take a few years after construction before we really have the (ethanol) buyers.”

 
Japan has been in discussions since 2001 with Brazil about signing a long-term ethanol import contract to help trim rising carbon emissions in a time of accelerating climate-change worries.  Talks have dragged, however, as both Japan’s public and private sectors have fretted about the best way to ensure a stable supply of the biofuel to the country’s fuel market.