U.S. ethanol industry finds sweet deals in Brazil as sugar prices soar
By Chris Prentice and Reese Ewing
NEW YORK/SAO PAULO Aug 4 (Reuters) - U.S. ethanol plants and traders are rushing to sell biofuel to Brazil as tightening supplies and logistics in the South American market give the world's top producer a rare opportunity to ship south during the peak sugar cane harvest, sources said.
U.S. ethanol plants are pumping out a record 1 million barrels per day taking advantage of cheap and plentiful corn feedstock, pushing domestic prices to three-month lows.
But they are finding unexpected demand in rival Brazil, where production is falling short of expectations as skyrocketing sugar prices have spurred mills to crush more cane into sweetener rather than make ethanol.
That has opened an arbitrage window at an unusual time of the year, highlighting the diverging market conditions between the world's two top ethanol producing nations.
"U.S. corn prices are cheap and the dollar has weakened creating a window of opportunity for ethanol shipments to Brazil's Northeast," said Tarcilo Rodrigues, the lead ethanol specialist at Bio Agencia brokerage and consultants.
Rodrigues said mills in the main center-south cane region, which is in the peak of harvesting, typically ship ethanol to the northeast, which is unable to produce sufficient biofuel for demand in the region.
But tank capacity at the main southern ports is currently occupied by diesel imports by the state-run oil company Petrobras, blocking intercoastal shipments of ethanol, he said.
Brazil's northeast cane crushing season is still some weeks off from ramping up its own ethanol mills, which accounts for only 10 percent of Brazil's cane output, as the region winds down its interharvest period leaving biofuel supplies tight. Continuación...