Will The Brazilian Ethanol Machine Challenge US Renewable Fuels Policies?

CattleNetwork.com
1/12/2009 10:25:00 AM

The corn market, and to an arguable extent, the soybean and wheat markets, have been a function of the demand for ethanol and the US renewable fuels policy. That policy sets annual targets for ethanol production and keeps in place a subsidy for fuel blenders and a tariff that make foreign produced ethanol more expensive when it enters the US market. Next to the US, the world’s biggest ethanol producer is Brazil, which converts sugarcane to fuel, and runs a substantial amount of its motor vehicle traffic on ethanol. But is Brazilian ethanol a real competitive threat to the Midwestern corn grower?

Brazil has nearly doubled its ethanol production since 2003, and will produce over 7 billion gallons in its current marketing year, compared to the 9 billion in the US, according to Don Hofstrand, in the January Iowa State Ag Decision Maker. Hofstrand says Brazil initiated a renewable fuels program in the 1970’s during the high oil price era, and kept building it into today’s robust ethanol program.

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