Banco Nacional de Desenvolvimento Economico e Social, Brazil’s national development bank, will lend sugar-cane mills as much as 4 billion reais ($2.2 billion) to plant more crops as ethanol supplies dwindle.
The 72-month loans, available through Dec. 31, may prompt companies to renew as much as 1 million hectares (2.5 million acres) of aging plantations or develop new ones, the Rio de Janeiro-based lender said today in a statement.
Brazil’s ethanol industry is struggling to keep up with demand after cash-strapped mills planted fewer crops following the 2008 credit crisis, Renata Marconato, an analyst at the agricultural consulting company MB Agro, said today in a telephone interview from Sao Paulo.
“Brazil needs this,” Marconato said. “Drivers are switching to gasoline because ethanol is expensive and there’s been a small drop in purchases of flex-fuel cars” that can run on just ethanol.
Sugar-cane yields fell to 50 metric tons a hectare in some areas last year due to frost and aging plantations, which must be renewed every five years to maintain productivity, she said. The average annual yield per hectare in Brazil is about 80 tons, she said. The yearly harvest season in the country’s Center South region typically ends in December.
The funding program, called Prorenova, may boost ethanol production by as much as 4 billion liters (1.1 billion gallons) in two harvests’ time, BNDES said.
Brazil’s Center South produced last year about 20.4 billion liters of ethanol from April to December, the annual harvest season, 18 percent less than in 2010, the Sao Paulo-based cane industry association Uniao da Industria de Cana-de-Acucar said Dec. 15.
Brazilian anhydrous ethanol, which is blended with gasoline, cost 1.34 reais a liter on the spot market on Jan. 6, up 52 percent from the same time in 2009, according to information compiled by Bloomberg.
To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net
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