Brazil’s Sugar-Cane Industry Won’t Benefit From Fuel-Price Rise

Brazil’s ethanol mills won’t benefit from state-run oil company Petrobras (PETR4)’s decision to raise the price of gasoline, which competes against the sugar-cane based fuel at the pump, and diesel.

An 8 percent increase in diesel prices will boost production costs for mills, offsetting the gains from a 4 percent rise in gas prices, sugar-cane industry group Unica said Nov. 29 in a statement.

“Any gains in the competitiveness of ethanol from the increase in gasoline price will be practically neutralized from the effect an increase in diesel will have on production costs,” Antonio de Padua Rodrigues, technical director of Unica, said in the statement. “The impact of higher diesel costs on ethanol production is very significant.”

Petrobras also didn’t disclose the details of a new pricing mechanism for fossil fuels that would have lent more transparency to future prices of ethanol, according to the statement.

Petrobras, officially known as Petroleo Brasileiro SA, announced the price rise on Nov. 29.

Unica is officially known as Uniao da Industria de Cana-de-Acucar.

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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