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 Rising Demand
Booming demand for Brazilian sugar and ethanol
Global demand for ethanol is expected to grow by 36 billion liters until 2010, a 78% increase over 2005 levels, with a 48% share to Brazil, generating a 104% increase in local production. Environmental and political concerns are among the major drivers of growth in the demand for ethanol, as countries all around the world are being pushed by society to substitute part of their oil-derived fuels such as gasoline and diesel, for cleaner and renewable fuels like ethanol.
Major initiatives in this area are:
• The Kyoto Treaty, the first major globally coordinated environmental initiative that established target reductions of greenhouse emissions for major developed countries
• The 2005 Renewable Fuels Standard in the US, which is re-shaping the US ethanol industry
• The 2003 Biofuels Directive in the EU, which established targets for the use of renewable fuels by 2010 and 2020
High oil prices and tax incentives on the purchase of flex-fuel vehicles as well as on the use of biofuels are also fueling the demand for ethanol. In Brazil, the rise in sales of flex-fuel cars is boosting the consumption of ethanol, with an estimated additional demand of 8 billion liters by 2010.
The global demand for sugar is expected to grow at moderate rates over the next few years, but with substantial impact to Brazil:
• World demand for sugar is expected to grow by 13 million tons from 2005/06 to 2010/11, a volume which corresponds to 45% of the Brazilian production
• The WTO ruling forcing EU to gradually reduce sugar export subsidies to zero by 2010 will lead to a reallocation of 6 million tons of sugar production to countries with more competitive production costs
• Brazil, the leading producer and exporter of sugar, has captured more than 100% of the increase in global demand over the last 5 years, and is expected to continue to gain market share as it remains the most competitive player in the global sugar market.
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