London, Feb 3 - Brazil's sugar and ethanol industry could see growth in demand and is resisting the economic slowdown better than other sectors, Plinio Nastari, head of the agricultural consultant Datagro, said.
Brazil's fuel ethanol sector receives strong backing from the authorities and provides a viable commercial biofuel alternative to petrol through the use of flex-fuel vehicles, which can be powered by ethanol, petrol or a combination of both.
In Brazil, ethanol is derived from sugarcane, one of the country's leading agro-industries.
"Ethanol production will not be affected by the credit crunch," Nastari, an authority on the Brazilian sugar and ethanol sector, told Reuters in an interview by email this week.
"The determining factors of ethanol production will be demand for the domestic and export markets. We believe that, in spite of a reduction in total car sales, ethanol demand in the domestic market will still rise 2.1 billion litres in 2009/10."
Nastari, Datagro's president, said: "Ethanol exports are likely to fall, on the other hand. However, ethanol demand (in the domestic market) is expected to rise, but much less than the volumes observed in previous years."
Ethanol sales by Brazil's centre-south mills, from April through October 2008, jumped 26 percent from the same period in 2007, an output increase of 2.7 billion litres of ethanol, according to the Sugar Cane Industry Association (Unica).
Low prices compared with those of petrol at the filling station stimulated demand for hydrous ethanol, Unica said.
Brazil is the world's largest sugar and ethanol exporter, and the centre-south accounts for almost 90 percent of the national cane crop. According to Unica, the centre-south produced 24.6 billion litres of ethanol in 2008/09, up from 20.3 billion litres a year earlier.
SUGAR, ETHANOL OUTPERFORM OTHER SECTORS
Brazil's sugar and ethanol industry is faring better than other key sectors as demand remains resilient despite the gloomy economic outlook, said Nastari, who will be a keynote speaker at the Feb. 8-10 Kingsman Dubai sugar conference.
"The sugar/ethanol industry, unlike most others which are suffering from falling prices and falling demand (mining, paper and pulp, automobiles, construction, etc), is in a much better condition," he said.
"Since October 2008 prices have recovered for sugar and ethanol, and demand is on the rise, mostly for sugar for exports and for ethanol in the domestic market."
The impact of the credit squeeze on Brazil's sugar/ethanol sector is illustrated by the fact prices have risen timidly during the present period in between sugar crops, especially considering a forecast that carry-over stocks of ethanol will be tight again, Nastari said.
He referred to the postponement of a number of new plants, expected to come onstream in 2009 and 2010, and a reduction in orders with equipment suppliers.
Nastari said Brazil's relative self-sufficiency should mean it suffers less from the global downturn than other economies.
"The Brazilian economy is going to be more resilient than others largely due to Brazil's sizeable domestic market, and its relatively low degree of dependence on the world market -- what was a negative mark until recently, has now become an advantage," he said.
"Consolidation of the industry will continue moving fast, and the importance of foreign investment in the industry will grow. Economic growth is expected to fall from an expected 5 percent per annum to a range of 1.5 to 2.0 percent per annum."