Brazil ethanol makers seek large cost cuts to remain competitive

Source: By Marcelo Teixeira, Reuters • Posted: Wednesday, July 8, 2015

SAO PAULO, July 7 (Reuters) – Brazil’s ethanol makers are pursuing aggressive production costs reductions through new technologies to remain competitive in the fuels market and escape erratic government policies that have sent dozens of mills into bankruptcy.

Ethanol producers hope to boost agricultural productivity by having farmers plant the first genetically modified (GMO) sugar cane in a few years. Ethanol production costs are expected to fall due to second-generation ethanol made from waste products.

Around 70 mills went bankrupt in Brazil in the last five years as sugar prices fell and subsidized gasoline sharply reduced ethanol’s share in many regional markets.

“We are making a huge effort in the technological area, speeding up development of new varieties. In 2017 we should have GMO cane on the market,” Copersucar Chairman Luis Roberto Pogetti said in a presentation at the 2015 Brazil Ethanol Summit, organized by cane industry group Unica.

Copersucar, the world’s largest trader of sugar and ethanol after teaming up with U.S. commodities firm Cargill Inc, is a shareholder of the Cane Technology Center (CTC), which runs several research projects in the sector.

Other large groups such as Raizen, Odebrecht SA, Bunge Ltd, Tereos and Sao Martinho SA are also CTC shareholders, in a structure designed to boost investments in research and development.

“We expect, for example, to double the amount of ethanol that can be produced in 1 hectare of land from 7,000 liters currently to 14,000 liters in 10 years,” Pogetti said.

CTC says the new genetically modified cane is expected to reduce producers’ spending with plant care, since it will be resistant to insects that cost the sector around 3 billion reais ($967 million) per year on agrichemicals and lost yields.

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