Following tax cuts to producers and an increase from 20%-25% in the gasoline admixture, ethanol output in Brazil has seen a sharp increase this year. However, according to BNamericas Intelligence Series oil and gas report, Brazil’s ethanol sector is still in need of greater investment. Without new mills and new projects the ethanol industry will lose ground to gasoline. According to the UN, investments in the sector are to reach US$20 billion in the next five years, however according to Brazil’s cane association Unica, only three new mills are scheduled to open this harvest and up to 12 are facing closure because of financial difficulties. Rising production costs and the artificially low cost of gasoline because of government subsidies are dampening investments. Argentina is facing problems as well. Biodiesel exports fell 49% year on year in the first quarter to 225,750 tons because of EU caps on food-crop-derived biofuels, higher tariffs, and the backlash from the nationalization of YPF, a subsidiary of Spain’s Repsol.
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