Feb. 3, 2015, Sao Paulo — The Brazilian government will raise the mandatory ethanol blend to 27 per cent from a current 25 per cent on 16 February, according to the presidential chief of staff Aloizio Mercadante.
The congress passed legislation in September 2014 that allows the government to raise the blend to as much as 27.5 per cent, but Brasilia opted not to raise the blend to the maximum.
According to market estimates, the blend hike will increase demand for anhydrous ethanol by roughly 770mn liters per year (13,268 b/d).
Brazil’s leading sugar and ethanol industry association Unica said there are sufficient stocks to meet the additional demand.
The blend hike is the most recent in a series of government measures to improve the outlook for the crippled ethanol industry.
On 19 January, the government said it would reinstate the R0.22/l ($0.307/USG) on gasoline from 1 February, which will increase the competitiveness of hydrous ethanol. The biofuel competes with gasoline at the pump.
At the same time, Brazil’s second-largest state, Minas Gerais, lowered the ICMS value-added tax on ethanol and raised the same tax on gasoline.
As a result of these measures, mills in the center-south region are expected to allocate 57 per cent of the cane they crush to ethanol production in the 2015/16 season compared with 55 per cent in the 2014/15 season, according to local sugar and ethanol consultancy Datagro.