Brazil Said to Plan Higher Ethanol Blend as Early as May

Brazil, the world’s biggest sugar- cane grower, is considering raising the amount of ethanol mixed with gasoline as early as May as millers are forecast to process a record crop next year, a government official familiar with the plan said.

The mandatory ethanol blend in fuel sold at Brazilian service stations would rise to 25 percent from 20 percent now, said the official, who asked not to be named because he’s not authorized to discuss the plan publicly. Mills in the country process most of the sugar-cane crop into sweetener and fuel between April and November.

Petroleo Brasileiro SA (PETR4), Brazil’s state-run oil producer, has been importing gasoline and selling it below cost this year after fuel demand in the world’s second-largest emerging economy exceeded domestic supplies. Brazil lowered the ethanol blend to 20 percent from 25 percent in October 2011 after rainfall delayed sugar-cane harvesting and reduced crop yields.

Brazil’s finance and energy ministries declined to comment in e-mailed responses to questions.

A record sugar-cane crop next year means ethanol production in Brazil’s Center South region will rise to a three-year high of 23.7 billion liters (6.3 billion gallons), Pedro Mizutani, head of sugar and ethanol at Royal Dutch Shell Plc (RDSA) and Cosan SA Industria & Comercio’s Raizen venture, said in a Dec. 13 interview. Raizen is the world’s largest sugar-cane processor.

Record Crop

Sugar-cane output in the region will rise to a record 580 million metric tons, while production of the sweetener made from the tropical plant will increase to an all-time high of 36 million tons, Mizutani said. The Center South produces about 90 percent of Brazil’s sugar and ethanol.

Sugar futures have slumped 40 percent in the past two years after Brazil and India, the largest producers, increased output of the sweetener. The contract for March delivery fell 1.1 percent to 19.20 cents a pound at 10:01 a.m. on ICE Futures U.S. in New York.

To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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