Friday, September 21, 2007

Yikes, the D.T.'s: Brazil Ethanol Sector Fears 'Delirious' Growth

From Reuters via the Forest Conservation Portal:

Low sugar and ethanol prices have been fueling the debate in Brazil on how this will affect investments and the forthcoming growth in the industry, which intends to lead the world's rush for biofuels.

Projected investments in new mills are seen around 17 billion reais, but the market suffers from poor regulatory structure and a lack of long-term planning, officials said.

"The industry is growing faster than a sustainable rate. That is why prices are falling so much," said Plinio Nastari, president of Datagro consultancy.

With expected demand for 720 million tonnes of cane by 2013/14, the sector should not grow more than 7.3 percent per year to avoid worsening the current oversupply, Nastari said late Monday after a sugar and ethanol seminar.

But Brazil's cane crop has risen an average of 9.9 percent each year since 2000, boosted by increasing ethanol demand.

Datagro projected demand for cane is currently higher the one expected by the consultancy a few years ago, but investments in new mills have surpassed what was forecast, and are at an exceedingly high level, Nastari said.

There are 138 projects of new mills. The building of 79 of them are highly probable, while 30 are moderately probable and 29 will not likely advance out of planning, he added.

"I think there is still not any (international ethanol) market. We're all working irrationally. There is not any strategy either from the private sector or from the government,"...