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USDA GAIN: Biofuels

04 August 2014

USDA GAIN: Brazil Biofuels Annual 2014USDA GAIN: Brazil Biofuels Annual 2014

Total Brazilian ethanol production for 2015 is projected at 26.9 billion liters, a 5 percent increase compared to 2014. Ethanol exports are forecast at 1.8 billion liters, up 200 million from current year. The biodiesel industry remains regulated by the government which recently increased biodiesel blend requirements to 6 percent effective July 1, 2014 and 7 percent effective November 1, 2014. As a consequence, biodiesel production for 2015 is projected at 4.4 billion liters, up 900 million liters from 2014.
USDA GAIN Report - Biofuels

Policy and Programs

Government Support Programs for Ethanol

Regional Producer Subsidy

The president of the Northeastern Sugarcane Producers Union (UNIDA) reports that Brazilian government should

According to Bill # 12.999/14, the amount of R$ 170 million will be paid to sugarcane growers from the Northeast affected by one of the most severe drought in the past decades. Approximately 23,000 growers will be eligible for a Regional Producer Subsidy. The release of the funds depends on President Dilma Roussef’s signing a provisional measure (“Medida Provisoria”) which has not occurred yet.

Ethanol use mandate

As of May 1, 2013, the ethanol content blended to gasoline is set at 25 percent, according to Resolution # 1 from February 2013, of the Sugar and Ethanol Interministerial Council (CIMA). Earlier in 2014, the Sugar and Alcohol Millers Association of São Paulo State (UNICA) requested the increase of the blend to 27.5 percent. GOB has conducted technical studies led by Petrobras, the Brazilian oil company, and should announce results in late September. However, if recommended by the studies, it is unlikely that the new blend would become effective in 2014.

The National Association of Motor Vehicle Manufacturers (ANFAVEA) reports that further increases in the blend would hurt the performance of engines designed to be powered exclusively by gasoline.

Tax incentives for ethanol

Tax incentives for ethanol-flex fuel vehicles

The table below shows the value of IPI (Tax on Industrialized Products), PIS/COFINS (Contribution to the Social Integration Program/Contribution for Financing Social Security) and ICMS (State tax for circulation of goods and services) for different categories of vehicles as reported by the National Association of Motor Vehicle Manufacturers (ANFAVEA). Note that taxes on flex cars are lower than taxes on gasoline powered cars, especially with regard to the IPI. From May 2012 through December 2013 temporary tax reductions were authorized by GOB. [For tables, please download the document]

Tax incentives for ethanol fuel

The CIDE (Contribution for Intervention in Economic Domain) value remains at zero for both ethanol and gasoline.

PIS/COFINS (Contribution to the Social Integration Program/Contribution for Financing Social Security) federal taxes are charged together. For gasoline, PIS/COFINS are set at R$0.2616/liter. In May 2013, through Provisional Measure # 613, the GOB created a PIS/CONFINS presumed credit for the ethanol industry which in practice dropped to zero the R$0.12/liter (R$0.048/liter on producers and R$0.072/liter on distributors) that applies to the product. On December 2013, GOB through Provisional Measure # 634, also extended the zero tax applied to PIS/COFINS to all imported ethanol, including ethanol for fuels.

No changes have been made to the ICMS - State tax for circulation of goods and services. There are different tax regimes depending on the Brazilian state. ICMS charged on ethanol varies from 12 to 27 percent, with most states charging 25 percent. ICMS for gasoline varies from 25 to 31 percent.

Credit Lines

In March 2014, the Brazilian Government announced the continuity of the Prorenova for 2014, a credit line of R$3 billion (approximately US$ 1.25 billion) available to finance the renewal and/or expansion of sugarcane fields. The interest rate is set at the “long term interest rate” (TJLP) plus 2.7 percent per year. BNDES set a limit of R$ 6,500 to finance each hectare planted to sugarcane and the total limit of R$ 150 million per ficancial group.

BNDES also announced the continuity of the credit line (R$ 2 billion) to support ethanol storage (PASS program) for 2014. The interest rate is set at the “long term interest rate” (TJLP) plus 2.7 percent per year. The reference price is set at R$ 1.50/liter of anhydrous ethanol and R$ 1.35 for hydrous ethanol.

Ethanol Import Tariff

No changes have been made to the ethanol import tariff which remains zero up to December 31, 2015, according to Resolution #94 of the Ministry of Development, Industry and Commerce (MDIC)/Chamber of Foreign Trade (CAMEX).

Ethanol Supply Contracts

No changes have been made to the ethanol supply contracts set by the National Agency of Petroleum, Natural Gas and Biofuels (ANP). Fuel distributors are required to adopt a yearly supply contract to meet purchasing targets. The target is equivalent to 90 percent of total gasoline C (gasoline blended with ethanol) sales from the previous year and will be enforced in the beginning of every crop year (April 1). If distributors choose not to set a supply contract and buy the product on a monthly basis (direct purchase), they are required to have stocks on the last day of the month equivalent to the volume of gasoline C marketed in the subsequent month of the previous year.

Government Support Programs for Biodiesel

Biodiesel use mandate

The biodiesel use mandate was set at 5 percent (B5) up to July 31st 2014. Provisional Measure 647 from May 29th, 2014, set the new biodiesel blends to diesel at 6 percent (B6) as of July 1st, 2014, and 7 percent (B7) as of November 1st, 2014. The increase of the biodiesel blend has been a longstanding request from industry given that industrial capacity is more than 2 times actual production goals.

Biodiesel Import Tariff

According to the Secretariat of Foreign Trade, the import tariff applied to biodiesel (NCM 3826.00.00) is set at 14 percent.

Transport Fuel Consumption

Transport fuel projections assume a 2.5 percent growth rate in the Brazilian Growth Domestic Product (GDP). Sales by fuel distributors as informed by ANP for 2013 and January-May 2014 are used as baseline for projections. No information is available for diesel use breakdown.


Ethanol is an alcohol made by fermenting sugar components of plant materials such as corn and wheat starch, sugarcane, sugarbeet, sorghum, and cassava.

Brazilian Bioethanol Production, Supply and Demand (PS&D) Tables

Sugarcane is the source of feedstock for ethanol production in Brazil. The tables below show the Brazilian ethanol supply and demand (PS&D) spreadsheets for “All Uses” and ”Fuel Use Only“ for calendar years 2010 through 2015. Several remarks must be made regarding the aforementioned tables - see Notes on Statistical Data – Ethanol (Section 6.1.).

ATO/Sao Paulo historically reported all figures related to the sugar-ethanol industry in marketing years (MY) and, therefore, made all necessary adjustments to convert from marketing to calendar years. Brazilian official marketing year for sugarcane, sugar and ethanol production, as determined by the Brazilian government, remains May-April for the center-south producing states, although sugarcane crushing has started as early as late March in past years. Official marketing year for the North-Northeast is September-August.

Note: no Brazilian government entity or trade source maintains production figures on use “for fuel” or “other uses”. All ethanol production figures are solely reported as hydrous and anhydrous volumes. According to post contacts, ethanol plants produce different specifications of hydrous and/or anhydrous, but make no distinction between fuel/other uses. The use for fuels/other uses (industrial, refined or neutral) are determined at the end user level.


Production Estimates

Post projections are based on industry sources. To be in accordance with the actual feedstock production cycle, the following narrative describes sugarcane and ethanol production in marketing years (MY). Note that all necessary adjustments were made to convert production figures from MY to calendar years.

The Agricultural Trade Office (ATO)/Sao Paulo estimates the MY 2014/15 Brazilian sugarcane production at 629 million metric tons (mmt), down 21 mmt from MY 2013/14. The center-south (CS) region is expected to harvest 575 mmt of sugarcane, a 4 percent decrease from the previous season, due to projected lower agricultural yields as a result of irregular weather conditions (drought) and below average replanting of sugarcane. Post projects the North-Northeastern (NNE) production for MY 2014/15 at 54 mmt, similar to MY 2013/14.

Total sucrose (total reducing sugar, TRS) content destined for sugar and ethanol production during MY 2014/15 is estimated at 46.5 and 53.5 percent, respectively. The revised sugar-ethanol mix for MY 2013/14 is 45.5 and 54.5 percent. Sugar-ethanol mills are expected to divert more sugarcane to sugar in the upcoming crop. The industry is expected to comply with the sugar export contracts and guarantee enough anhydrous ethanol production to blend with gasoline. Hydrated ethanol production will be the last option pursued by millers due to lack of profitability.

It is early to predict MY 2015/16 production. More accurate numbers should be available in the first quarter of 2015 with the development of feedstock from new sugarcane plantings and recovery from current harvested areas; e.g., sugarcane from second, third, fourth, fifth and older cuts; as well as projections for sugar and ethanol demand in both the domestic and international markets. Current production forecast is based on the assumption that regular weather conditions will prevail throughout the sugarcane production cycle.

Post projects sugarcane production for MY 2015/16 at 660 mmt, a 5 percent increase compared to the current crop, assuming historical stock renewal rates and agricultural yields.

ATO projects 2015 total ethanol production at 26.9 billion liters, up 5 percent from 2014 (25.6 billion liters). Ethanol for fuel production is forecast at 23.8 billion liters for 2015, a 1.3 billion liter increase over 2014.

Industrial Capacity

ATO/Sao Paulo has adjusted total industrial capacity for sugarcane crushing to 3.35 million metric tons/day, down 2 percent from previous crop, to reflect the reduction in the number of ethanol and sugar-ethanol plants in operation.

Ethanol production capacity for 2015 is forecast at 39.7 billion liters, equivalent to revised figure for 2014. This figure reflects the lower number of ethanol and sugar-ethanol plants in operation.

Ethanol production capacity estimated in this report was based on production figures reported by UNICA. Post took the highest ethanol production figure in a given 15-day period, and extrapolated to the entire Center-south crushing season. A similar procedure was followed for Northeast production based on MAPA reports. Sugarcane crushed for ethanol production was calculated based on the actual production breakdown for sugar/ethanol as described in previous GAIN reports. On average, one metric ton of sugarcane produces about 80.5 liters of ethanol.

New Investments/Shut Down of Ethanol Plants

Total number of sugar-ethanol mills in 2014 is estimated at 390 units, whereas total operating units for 2013 was 399. Investments in new greenfield projects remain scarce. UNICA estimates only one new plant for 2014/15. Concurrently, several units have been closed in the past couple of years mainly due to financial constraints. UNICA projects that 10 units should close operations this season. Note that some of the units have been acquired by larger and financially healthy groups.

The graphs below show revised data for the evolution of new and closed ethanol and sugar-ethanol plants as of MY 2005/06 as reported by UNICA.

Sugarcane and Ethanol Prices received by Producers

Sugarcane prices received by third party suppliers for major producing states are based on a formula that takes into account prices for sugar and ethanol prices both in the domestic and international markets. The State of Sao Paulo Sugarcane, Sugar and Ethanol Growers Council (CONSECANA) was the first to develop this formula for the state of Sao Paulo, the major producing state comprising roughly 60 percent of the Brazilian production.

The average state of Sao Paulo Sugarcane, Sugar and Ethanol Growers Council (CONSECANA) price for the current crop (MY 2014/15) for the April-May 2014 period is R$0.4697 kg of TRS, or approximately R$58.46 ton of sugarcane. CONSECANA reports that the average sugarcane price for the state of Sao Paulo for the 2013/14 crop is R$0.4572 per kg of TRS, or R$60.96 per ton of sugarcane.

The Ethanol Indexes released by the University of Sao Paulo’s College of Agriculture "Luiz de Queiroz" (ESALQ) follow. The Indexes track anhydrous and hydrous ethanol for fuel prices received by producers in the domestic spot market.


Brazil is an important user of ethanol for fuel consumption. Total domestic demand for ethanol for calendar year 2015 is forecast at 26.6 billion liters, a 4 percent increase relatively to 2014, based on likely higher supply. Total ethanol consumption for use as fuel is estimated at 24.2 billion liters for 2015. Ethanol consumption for other uses is projected at 2.4 billion liters, up 50,000 liters compared to 2014 due to steady demand from the chemical industry.

The size of the Brazilian light vehicle fleet was estimated at over 33 million units in 2013 and pure hydrous ethanol and flex fuel powered vehicles together represent approximately more than 55 percent of the total fleet. Industry projects that the share of flex fuel vehicles is likely to reach over 80 percent by 2020.

The table below shows the licensing of flex fuel vehicles (FFV) and hydrous ethanol powered cars, as reported by the Brazilian Association of Vehicle Manufacturers (ANFAVEA). Sales of FFV currently represent over 95 percent of total monthly vehicle sales. 

The steady sales of flex-fuel vehicles do not solely guarantee a higher demand for ethanol given that consumers’ decisions are driven by the ratio between ethanol and gasoline prices. The 70 percent ratio between ethanol and gasoline prices is the rule of thumb in determining whether flex car owners will choose to fill up with ethanol (price ratio below 70 percent) or gasoline (price ratio above 70 percent). Note that the crushing period in the center-south started in April/May, but gasoline prices still remained competitive in June 2013 in several Brazilian states.

Fuel consumption in Brazil, as reported by the Petroleum, Natural Gas and Biofuels National Agency (ANP), follows. The figures take into account the product sales by distributors and do not include illegal sales, which were common in the past for hydrous ethanol due to tax differentiation between both types of ethanol. As a result of measures taken by ANP to avoid tax evasion, figures as of 2008 better reflect total hydrous ethanol consumption.



Brazilian total ethanol exports for 2015 are forecast at 1.8 billion liters, up 200 million liters from 2014. Total 2014 fuel ethanol exports are projected at 900 million liters. The tables below show ethanol exports (NCM 2207.10 through 2207.20.19) for 2013 and 2014 (January-June), as reported by the Brazilian Secretariat of Foreign Trade (SECEX).


Brazilian total ethanol imports for 2015 are projected 440 million liters, almost exclusively for fuel use. The tables below show ethanol imports (NCM 2207.10 through 2207.20.19) for 2013 and 2014 (January-June), as reported by the Brazilian Secretariat of Foreign Trade (SECEX).

Ending Stocks

Beginning stocks for ethanol for “All Uses” table is based on information from MAPA and reflect all stocks at ethanol plants on January 1, 2006. Beginning stocks for ethanol “For Fuel Only” table is estimated based on historical average use of bioethanol for fuel/other uses.

On average, ethanol for fuel has represented 87 percent of total ethanol disappearance (consumption and exports), therefore Post assumed this percentage to calculate the theoretical beginning stocks for fuel in January 1, 2006. All other stock figures were calculated based on the difference between total supply and disappearance.

ATO/Sao Paulo projects ending stocks for fuel ethanol at 5.56 billion liters for 2015, down 1 billion liters from 2014. Ending stocks measured on December 31 of each year do not actually reflect the supply and demand balance. In general, ethanol plants in the center-south are nearing the end of the crushing season, while ethanol plants in the northeast are fully operating. As a consequence, stock levels are expected to be high.

Stock figures measured on April 1, after subtracting the disappearance (consumption and exports) during the first quarter of the year, will likely show a more realistic picture about product availability in the beginning of the new crop season (April).

Market for Ethanol Used as Other Industrial Chemicals

Ethanol for “other uses” is used by companies for chemicals, cosmetics, etc. It is common that “ethanol refineries” purchase hydrous/anhydrous ethanol to reprocess and resell to smaller businesses. During the reprocessing, these plants change the original specifications of the product to meet customer requirements.

The Ethanol – Other Uses Indexes released by the University of Sao Paulo’s College of Agriculture "Luiz de Queiroz" (ESALQ) follow. The Indexes track anhydrous and hydrous ethanol for “other uses” prices received by producers in the domestic spot market.


Biodiesel is a trans-esterified vegetable oil also known as fatty acid methyl ester produced from soy oil, cottonseed oil, rapeseed, oil, other vegetable oils, animal fats, and recycled cooking oils.

Brazilian Biodiesel Production, Supply and Demand (PS&D) Table

The table below shows the Brazil’s biodiesel supply and demand (PS&D) table for calendar years (CY) 2009 through 2015.



Biodiesel can be produced from several raw materials such as soybeans, cottonseed, animal fat, castor seed (Ricinus communis), African palm oil (“dendê”), “pinhao manso” (Jatropha curcas), sunflower, peanut, fried oil or others.

According to updated information reported by the Petroleum, Natural Gas and Biofuels National Agency (ANP), soybeans currently represents 76 percent of total biodiesel feedstock, followed by animal tallow (20 percent) and cottonseed (1 percent). The table below shows biodiesel production by raw material according to ANP and the Brazilian Association of Vegetable Oil Industry (ABIOVE).

The tables below show official USDA data for soy and cotton oil production for MY 20010/11 through 2013/14, as well as a projection for MY 2014/15.

Production Estimates

Biodiesel production remains regulated by the government. In 2015, total Brazil biodiesel production is forecast at 4.392 billion liters, a 25 percent increase compared to revised estimate for 2014 (3.5 billion liters). The projection takes into account the increase of the mandatory biodiesel blend to 6 percent as of July 1st, 2014 and 7 percent as of November 1st, 2014.

Biodiesel production in 2013 was 2.92 billion liters, as reported by ANP. Cumulative January-March 2014 production is approximately 745 million liters. Biodiesel production is reported below.

ANP reports that as of May 2014, Brazil has 62 plants authorized to produce biodiesel. Current authorized industrial capacity is estimated at 21.8 million liters/day or approximately 7.85 billion liters/year, based on a 360 day operation cycle. This represents approximately 2.25 times the mandatory biodiesel production to be blended in mineral diesel in 2014; and a 2 percent increase compared to the authorized industrial capacity for the same period in 2013 (21.4 million liters/day).

ATO/Sao Paulo projects industrial capacity for 2014 and 2015 at 64 and 65 plants, respectively, or 8.3 billion liters per year in 2015, up 6 percent from current industrial capacity. Projections are based on information for authorized plants and requests for authorization provided by ANP and industry sources.

Cost of Production and Market Prices

The biodiesel market remains regulated by the government through a public auction system (see BR110013 – Brazilian Biofuels Annual Report for more information) which gives preference to producers with the Social Fuel Stamp. The Social Fuel Stamp provides incentives for poorer farmers (family farmers) in disadvantaged areas.

The tables below summarize the results of the 29th through the 36th auctions during 2013 and 2014. Additional auctions should take place in the upcoming months to guarantee supply for the remaining months of the year.

Biodiesel prices received by producers are determined by the public auction system (see Average Price in the tables above). Producers are not allowed to change the sales price set at the auctions and consequently must search for low cost raw material or hedge their activities to offset risk.

Industry sources report that raw materials represent approximately 70 to 80 percent of biodiesel production cost. Given that roughly 73 percent of biodiesel production still results from the use of soybean oil, the profitability of the sector is highly dependent on oilseed prices.

The tables below show the price for soybean oil in 2013 and 2014 (January-April). The average crude price in the state of Sao Paulo is R$2,253.88/ton for January-April 2014, a 10 percent drop compared to the same period in 2013 (R$2,505.75/ton).


Biodiesel domestic consumption remains regulated by GoB, thus the sector must comply with the biodiesel mandate which requires all mineral diesel to have a six percent biodiesel blend (B6) as of July 2014 and seven percent (B7) as of November 1 2014. Based on industry projections for mineral diesel domestic demand, ATO/Sao Paulo forecasts total biodiesel domestic consumption for 2014 and 2015 at 3.41 and 4.34 billion liters, respectively.

Biodiesel consumption for 2013 is estimated at 2.9 billion liters based on mineral diesel consumption of 58.49 billion liters and the mandatory mixture of five percent (B5) during 2013.


Export figures by country of destination for biodiesel (NCM 3826.00.00) for the years 2012, 2013 and 2014 (January-May), according to SECEX, are shown below. No import has been registered under tariff code NCM 3826.00.00.


ATO/Sao Paulo forecasts biodiesel ending stocks for 2015 at 84 million liters, similar to 2014 (82 million liters), based on the difference between total supply and disappearance (consumption and exports).

Advanced Biofuels

Brazil has no commercial use of advanced biofuels yet. Granbio has announced recently that its plant located in Alagoas should start producing advanced ethanol from sugarcane in 2014, but full capacity production (82 million liters) should be reached only in 2015.

In July 2014, the National Bank for Social and Economic Development (BNDES) announced a total of R$ 1.9 billion (approximately US$ 860 million) credit line under the “Paiss Agricola” program to fund agricultural research (genetic modified plants, sugarcane seeds to replace current feedstocks used for plantin, mechanization, etc), and development for the sugar-ethanol sector, including investimets in advanced biofuels.

Updated information from the industry reports the following second generation projects in Brazil for 2014 thorugh 2015:

A. Three commercial plants in operation:

  • In 2014 – one plant in the state of Alagoas with projected annual production of 82 million liters);
  • In 2014 – one plant in the state of Sao Paulo with projected annual production of 40 million liters);
  • In 2015 – one plant in the state of Goias with projected annual production of 40 million liters);

B. Two demonstration plants:

  • In 2014: one plant in the state of Sao Paulo with projected production of 3 million liters
  • In 2016: one plant in the state of Mato Grosso do Sul with projected production of 3 million liters

August 2014

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