Ethanol futures trade on the Brazilian Mercantile and Futures Exchange (BM&F)
is down 56% in 2007 compared to the same period in 2006, a recent study of Ethanol
Statistics shows. From January through July, approximately 212,610 cubic metres
of ethanol was traded on the exchange, compared to 485,430 cubic metres in 2006.
Because of the harvest season in Brazil’s main production region, the centre-south,
the months May through September are historically a strong trading period. The first
three months of this period, however, show unpromising results: 3,325 contracts
traded, compared to 11,213 in 2006.
New Ethanol Contract
In an attempt to make ethanol trade more attractive to foreign buyers, the BM&F
introduced a new ethanol contract earlier this year. The new contract is quoted
in US dollars, instead of the Brazilian real. In addition, its delivery point was
changed from the city of Paulínia, which is located 200 km away from Brazil’s coast,
to the Port of Santos, which handles more than 68% of all Brazilian ethanol export.
Despite the new contract, futures trade remained flat in its first 3 months at approximately
1,100 contracts per month.
Foreign ownership
The figures seem to match the increasing level of foreign ownership, as 12% of Brazil’s
sugarcane crushing capacity is reported to be in control of overseas groups and
investors. European sugar and commodity groups such as Tereos, Louis Dreyfus, Abengoa
and since last week also the U.S. giant Bunge Ltd. and Bermuda-based Infinity Bio-Energy,
now have direct access to a large part of Brazil’s low-cost sugar and ethanol, reducing
the need for futures contracts to secure supply.
These are some of the finding made in Ethanol Statistics’ latest report ‘The Brazilian
Ethanol Market 2007’, in which Brazil’s ethanol market structure is thoroughly analyzed.
Some of the issues explored include the expansion plans of foreign investors, the
complex relation between sugar mills, groups and cooperatives, Brazil’s ethanol
exports by country of destination and characteristics of Brazil’s ethanol consumption.
The report’s table of contents, list of tables and figures and introduction is available
at
www.ethanolstatistics.com.