Brazilian sugar, ethanol prices have become disconnected - economist

08 November 2012 09:24  [Source: ICIS news]

MUNICH (ICIS)--There has been a disconnect between sugar and ethanol prices in Brazil over the past three years, according to Leonardo Bichara Rocha, senior economist for the International Sugar Organisation, late on Wednesday.

Speaking at the F.O. Licht World Ethanol and Biofuels conference in Munich, Germany, Rocha said the Brazilian ethanol price had traditionally tracked the sugar price, until ethanol prices hit a ceiling in 2009.

“Gasoline prices reached a plateau in 2009, and ethanol prices cannot rise above gasoline if they are to remain competitive for flexi-fuel vehicle owners,” Rocha added.

Brazil has a large flexi-fuel fleet, which allows fuel consumers to choose whether to purchase gasoline or ethanol, depending on which is most attractively priced.

“The correlation between ethanol and sugar prices is no longer straightforward, as Petrobras has controlled gasoline since 2005,” he said.

The Brazilian government holds a majority share in oil major Petrobras, and is keen to limit gasoline prices in order to control inflation rates. It is thought gasoline prices are unlikely to increase for the foreseeable future as a result.

($1 = €0.78)

By: Sarah Trinder
+44 20 8652 3214

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