AgDM newsletter article, June 2007


Don HofstrandDon Hofstrand, retired extension value added agriculture specialist,

The energy crisis of the 1970s brought about high gas prices and limited supplies that generated an intense interest in renewable fuels and weaning ourselves from foreign sources of oil. However, when gas prices plummeted in the 1980s, renewable fuels and energy independence were quickly forgotten.

The story went differently in Brazil. After investing heavily in renewable fuels in the 1970s, they kept the program alive during the 1980s. This has given them a head start on the current situation. With its robust ethanol program, Brazil is expected to become energy independent this year.
This is a far cry from the U.S. which still imports over half of its oil. However, remember that the U.S. economy is much larger, the number of U.S. cars is much greater and the U.S. highway system is much more extensive than in Brazil. So, U.S. energy independence is a much bigger task.

Brazil’s ethanol history

In 1975 Brazil implemented four policies to stimulate ethanol production.

1) It required Petrobras, its major oil company, to purchase a required amount of ethanol.
2) It provided $4.9 billion of low-interest loans to stimulate ethanol production.
3) It provided subsides so that ethanol’s pump price was 41 percent lower than the price of gasoline.
4) It required that all fuels be blended with a minimum of 22 percent ethanol (E22).

In 2000, Brazil deregulated the ethanol market and removed is subsidies. However, depending on market conditions, all fuels are required to be blended with from 20 to 25 percent ethanol.

Flex-fuel vehicles were introduced in 2003. These vehicles can run on straight ethanol, straight gasoline or a blend of the two. Today more than 70 percent of the new cars sold in Brazil are flex-fuel.

To receive an operating license, all fueling stations must provide an ethanol or ethanol-blend pump. Ethanol at the pump is sold at 60 to 70 percent of the price of gasoline. This compensates for the lower energy content of ethanol. However, the prices of gasoline and ethanol vary independently of each other. So Brazil’s flex fuel vehicle program means that consumers have discretion in the combination of gasoline and ethanol they purchase.

U.S. and Brazilian ethanol comparison

The feedstock for Brazilian ethanol is sugarcane. The Brazilian government has invested in research designed to improve sugarcane varieties that have resulted in sugarcane that is more resistant to drought and pests and yields higher sugar content. During the last 30 years, sugarcane yields have increased three-fold.
In the U.S. the feedstock is corn. Below is a comparison of Brazil’s sugarcane-ethanol industry and the U.S. corn-ethanol industry.

Brazil – Sugarcane

United States – Corn

Sugarcane provides five cuttings over six years and then is replanted

Corn provides a crop every year and is planted every year.

Sugarcane yields about 35 tons per acre

Corn yields 4.2 tons per acre (150 bushels)

About 100 pounds of sugarcane to produce 1 gallon of ethanol

About 20 pounds of corn to produce 1 gallon of ethanol

Sugarcane feedstock is cheaper than corn per gallon of ethanol

Corn feedstock is more expensive than sugarcane per gallon of ethanol

An acre of sugarcane produces about 650 gallons of ethanol

An acre of corn produces about 400 gallons of ethanol

The sugar in sugarcane can be converted directly into ethanol

The starch in corn is first converted into sugar. Then the sugar is converted into ethanol

Sugarcane-ethanol can be produced cheaper than corn-ethanol

Corn-ethanol is more expensive to produce than sugarcane-ethanol

About 6,500 kcal of energy is used to produce one gallon of ethanol

About 28,000 kcal of energy is used to produce one gallon of ethanol

The energy source for ethanol production is bagasse (sugarcane by-product) 

The energy source for ethanol production is natural gas, coal and diesel

Brazil is the second leading ethanol producer at 35% of  total

U.S. is the leading ethanol producer at 37% of total

Currently about 7 million acres are used for ethanol production

Currently about 14 million acres are used for ethanol production

Brazil has great potential for expanding sugarcane acreage without limiting the acreage of other crops.

U.S. expansion of corn acreage will come at the expense of reduced soybean and other crop acres.

No subsidies for ethanol

A $.51 per gallon subsidy.

No import tariffs on ethanol

A $.54 per gallon import tariff.

Brazil’s ethanol production potential

Brazil has a natural advance in ethanol production. It has a vast unused or little-used land area that can be converted to agricultural production. In addition, it has a tropical climate well suited for sugarcane production.

Brazilian Acreage *

Of Brazil’s land mass, about half of it consists of the Amazon forest and natural forest reserves. The other half breaks down as follow:

  Million Acres
Pasture land (cattle) 550
Cropland (soybeans, etc.)  105
Permanent crops (oranges, sugarcane, etc).  37
Reforestation (pine and eucalyptus)  12
Other (urban centers, lakes, etc.)   185
Savannah (Cerrado)    225
* Source: Latin Business Chronicle, May 18, 2007  

Brazil currently devotes about 14 million acres to sugarcane production, of which about 7 million acres are for ethanol production (the remainder is for sugar production). This is about ten percent of Brazil’s current cropland acreage.

About 250 million acres of degraded pastureland can be converted to sugarcane production along with the 225 million acres of savannah for a total of 475 million acres. If the entire 475 million acres are devoted to sugarcane/ethanol production (it is unlikely that all of it would be used for cane production), 310 billion gallons of ethanol would be produced annually assuming a production rate of 650 gallons per acre. This would convert into the energy equivalent of 205 billion gallons of gasoline because ethanol only has about two-thirds the energy of gasoline. By comparison the U.S. consumes about 120 billion gallons of gasoline per year.

Over the next six years, a sugar ethanol plant is planned to be built every month. However, Brazil lacks the financial capacity to adequately expand its ethanol industry. Foreign investment will likely be needed for Brazil to achieve its ethanol production potential.

The path to Brazil’s ethanol future will not be smooth. For example, high world sugar prices have stimulated expanded sugarcane plantings worldwide. Once planted, sugarcane produces for several years before replanting. Expectations of depressed sugar prices would shift sugarcane production to ethanol in the short term.

Environmental impact

From 1975 to 2000, the replacement of gasoline with ethanol reduced carbon emissions by 100 million tons. Big city improvements in air quality in the 1980s were evident. Conversely, the air quality degradation from a partial return to gasoline in the 1990s was also evident.

Traditionally, sugarcane fields have been burned just before harvest to remove leaves and fertilize the fields with ash. The smoke, which is blown into nearby towns, turns the sky gray and makes the air hazardous. However, a recent law bans the burning of sugarcane fields.

Sugarcane production requires hand labor at harvest. This creates a large group of migrant workers who can only find work a couple of months a year during sugarcane harvest. Machines will replace human labor for harvesting cane. Although this will increase sugarcane production efficiency, it will impact migrant workers.

Thirty-five percent of sugarcane is made up of fibrous material that is left over after pressing. This is called “bagasse”. Bagasse is burned to provide an energy source for the ethanol facility. This allows ethanol plants to be energy self-sufficient while also selling a portion of the generated electricity to utilities. Currently it is possible to generate 288 MJ of electricity from one ton of sugarcane. Of this amount, 188 MJ are needed to provide energy for the plant. Burning the sugarcane waste has allowed Brazil to become energy self-sufficient in electricity.

U.S - Brazil ethanol alliance

In March of 2007, President Bush and Brazilian President Luiz Inácio “Lula” da Silva formed an ethanol alliance. This relationship focuses on creating a global ethanol market. The geopolitical relationship has the potential for creating a global presence for Brazil as a major ethanol exporter to the world’s energy starved markets.

Currently about 20 percent of Brazil’s ethanol is exported. Of this amount, one-third goes to the U.S. with Japan and India consuming most of the remainder. Japan and Sweden are looking to increase ethanol imports from Brazil to help meet the Kyoto agreement requirements. Concerns about global warming will further improve Brazil’s opportunity.

In addition to Brazil’s ethanol potential, the increased usage of U.S. corn for ethanol production and the resulting decrease in soybean acres will serve to open up export markets for Brazil to increase its corn and soybean production.


“Brazil Exploits Ethanol as a Substitute for Petroleum.” UniversiaKnowledge@Wharton. 18 May 2007.
“Ethanol fuel in Brazil.” Wikipedia. 18 May 2007.
“Is Brazil’s Ethanol Bubble Set to Cool.” 7 May 2007.
Logan, S. “The Win-Win Brazil and USA Ethanol Alliance,” ISN Security Watch. 24 Apr. 2007. International Relations and Security Network. 20 May 2007.
Luhnow, D., Samor, G. 2006. “As Brazil Fills up on Ethanol, It Weans Off Energy Imports.” The Wall Street Journal. 16 Jan. 2006.
Rideg, T., Smith, M. “Brazil’s Ethanol: Big Potential.” Latin Business Chronicle. 14 May 2007.
U. S. Government Accounting Office Report. Six Country Comparison of Renewable Fuels Programs.


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