Brazil’s Agricultural Minister Luis Carlos Guedes Pinto said yesterday that if Japan guarantees purchases of Brazilian ethanol, Brazil will guarantee a long-term supply.  Ethanol supply contracts with Japan could be long-term, stretching over about ten years, said Guedes Pinto, who is scheduled to travel to Japan next weekend to participate in the Foodex food fair.

 
Brazil’s state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, for the past few years has been in talks with Japan, a major oil importer, about long-term ethanol export contracts, but Japanese officials have delayed sealing any deals as they wait for more guarantees that Brazil will be able to furnish ethanol without weather hitches or supply problems.

 
If a contract is closed, Petrobras has estimated that Japan could import between 1.8-6 billion liters of ethanol a year, depending on whether the government mandates a 3% to 10% mix of ethanol in its gasoline.  Last year, Brazil exported a total of 3.4 billion liters, of which less than 7% went to Japan, according to Agricultural Ministry data.

 
Petrobras and the Japanese Mitsui & Co. last week signed a memorandum of understanding to study the construction of an ethanol pipeline network in Brazil. The companies plan to study the technological and economic viability of a pipeline network aimed at exporting ethanol from Brazil to Japan and other markets, Petrobras said in a release.

 
Petrobras, and the Japan Bank for International Cooperation also signed a memorandum of understanding on biofuels on Monday, and the companies plan to evaluate financing possibilities for biofuel projects to be developed jointly by Petrobras and Japanese companies, both inside and outside Brazil.  Projects to be evaluated include the production and sale of ethanol and biodiesel, electric power plants using sugar cane bagasse as raw material.

Brazil President Luiz Inacio Lula da Silva said yesterday that he will push President Bush to reduce the United States’ $0.54/gallon ethanol import tariffs at a meeting later this week in Sao Paulo, where the two presidents are expected to sign an accord to spread the use of ethanol in the region during the visit. 

 
“High tariffs placed by the U.S. on Brazilian ethanol make no sense,” Lula said during his biweekly radio program.  “I think that we are close to an accord (in the Doha round) which could favor agricultural nations - principally those that don’t have the chance to compete globally,” said Lula, who also added that Bush is key to progress in the talks.

 
Sergio Gabrielli, the chief executive of Brazil’s state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, said yesterday his company won’t export ethanol to the U.S. if the import tariff remains in place: “The U.S. has the world’s biggest ethanol production and its biggest gasoline consumption…But it’s practically impossible to do business in ethanol with the currently existing tariff.”  Petrobras produces ethanol and also sells it domestically and to Venezuela and Nigeria; Petrobas is also in talks about major ethanol exports to Japan.

According to a study conducted by University of Campinas, Brazil could replace 10% of the world’s gasoline with its bio-friendly cane-based ethanol in 20 years if the right investments are made.

 
The study has been conducted over the past two years with participation by Transpetro, the distribution branch of Brazil’s state-owned oil firm, Petroleo Brasileiro SA.  About 20% of the BRL20 billion per year will be needed to invest in ethanol infrastructure, such as warehouses, ethanol-dedicated pipes and improvements in ports, and the rest will be needed to construct new mills and purchase industrial and agricultural equipment.

 
With the necessary investments, Brazil could boost its ethanol exports to 200 billion liters by 2025 from roughly 3.4 billion liters in 2006, the study said. The country’s planted area for sugarcane is currently at 5.4 million hectares for sugar and ethanol output and will need to expand to a hefty 30 million hectares.  Brazil currently has some 200 million hectares of degraded pastures, where agricultural crops can be planted without knocking down a single Amazon tree.

 
The majority of the investments would have to come from private companies and investors, with the rest coming from Brazil’s state-owned development bank, BNDES.

Brazil’s ethanol prices are currently more attractive than sugar prices, as they both compete for production in Brazil’s large sugar cane industry, says the Czarnikow Sugar Review.  Czarnikow  points to Brazil’s growing demand for FFVs and rising hydrous ethanol prices. “2007 should be a strong year for ethanol,” Czarnikow says.  Nonetheless, increased output and lower prices in the U.S. have weighed on Brazilian ethanol prices, but Czarnikow says additional demand will emerge at the lower levels if crude oil remains around $55/barrel.

Representatives from Brazil’s massive sugarcane ethanol associations will meet in Miami today with Florida governor Jeb Bush and Inter-American Development Bank president Luis Moreno to sign a protocol of intentions to build an ethanol research and development think tank, former Agriculture Minister, Roberto Rodrigues, said Thursday.
 
“The intention is to build, somewhere in the Americas, a research center that serves as a center for promoting ethanol use worldwide,“ Rodrigues said last week.
 
Rodrigues developed the idea and convinced the Inter-American Development Bank to get behind the project. Representatives from the Sao Paulo Sugarcane Association, or Unica, will travel with Rodrigues over the weekend for the one day visit.
 
Brazil and the U.S. are the world’s leading producers of ethanol. Brazilian ethanol is a derivative of sugarcane while U.S. ethanol is made from corn.

In 2-3 years, Brazil will be capable of producing ethanol fuel from sugar cane bagasse, an executive at state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, said earlier today.
 
Brazilian millers currently produce ethanol from the sucrose contained in sugar cane, and use the bagasse for the generation of electric energy.
 
Once producers are able to use cane bagasse, Brazilian ethanol output could double without expanding plantation areas, says Paulo Mauricio Cavalcante Goncalves, general manager for downstream planning at Petrobras.
 
The reduction in electric energy production from sugar cane bagasse would be insignificant when compared to the gains from the increase in ethanol output, he added.
 

Business daily Valor Economic reported on Friday that the price of land in ethanol- and sugar cane-rich southeastern Brazil is rising.  Land prices have risen by 2.5% in Sao Paulo, Minas Gerais, Rio de Janeiro, and Espirito Santo over the last 12 months; according to FNP, the average nationwide price increase has been 1.2%. 
Sao Paulo and Minas Gerais are some of Brazil’s largest sugarcane producers and home to large numbers of ethanol mills.  A sizable FFV fleet, large sugarcane plantations, and a growing world demand for renewable energy have all catalyzed the popularity of ethanol in Brazil over the past few years.
 
Valor Economic reports that, southeast land has risen by 18% to 5,739 Brazilian reals ($2,656) per hectare and that the northeast has also seen prices increase because of biodiesel demand by 2% over the last 12 months and 10.2% over the last three years to BRL1 ,362 per hectare.  Land values in the soy- and grain-rich southern states, however, have declined by 7% over the last three years and have been stable over the last year.  In the center-west soy and cotton-producing states, land prices have fallen by 20.5% over the last three years and remained stable over the last 12 months, Valor was told.

The Brazilian government, in hopes of lowering global trade barriers on ethanol, is looking to re-classify ethanol in the international trade arena as a fuel commodity, not an agricultural commodity.  Brazil, the world’s top ethanol exporter and lowest-cost producer, would benefit immensely from lowered trade tariffs on the biofuel. 

If ethanol were considered an energy commodity, then it could receive the same treatment as petroleum, said Celso Amorim, the country’s Foreign Trade Minister last month.  “No one, if it’s not for fiscal reasons, and this occurs in few cases, places a tariff on petroleum imports, because that would penalize the whole productive process of the country,” he added.
 
The U.S., the top buyer of Brazilian ethanol this year, imposes a hefty 54-cent-per-gallon duty on direct ethanol imports, as well as a 2.5% ad valorum tariff.  The E.U., expected to be Brazil’s top purchaser of ethanol next year, imposes a tariff of 10.2 euros per every 100 liters for denatured alcohol, and a tariff of EUR19.2 per 100 liters for undenatured alcohol.  Both types of alcohol can be used for biofuel production.
 

October’s registered ethanol shipments for Brazil, the world’s No. 2 ethanol producer after the U.S. but No. 1 ethanol exporter, hit 544.8 million liters, up 91% from the 285.5 million liters shipped abroad in the same month a year ago, according to preliminary data from the Foreign Trade Secretariat released yesterday.  Principal destinations for Brazil’s ethanol were the U.S., Venezuela, the Netherlands, and El Salvador, according to a press note released by the Trade Ministry.
 
Exports rose as well from the 364.2 million liters shipped abroad in September, and from the 479.7 million liters exported in August.  Most local traders have warned of a huge drop-off in Brazilian ethanol exports in the last quarter of this year, due primarily to sharply diminishing U.S. demand, as the U.S. corn harvest started and local ethanol plants come online.  October ethanol revenue climbed to roughly $276 million, more than 200% higher than the $89.9 million received in the year-ago period, and up as well from the $175.9 million registered in September.