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The Long Case for Sugar-Based Brazilian Ethanol Producer Cosan Limited

I am very bullish in the long term, but Cosan is being hurt by Petrobras keeping oil prices in the domestic market artificially low and the Brazilian Government threatening to increase tariffs. It even reported a loss in the last quarter for a company with a strong history of profitability.

There is a potential short-term catalyst of exporting to the USA since even with the $0.54 tariff, it may be competitive with corn ethanol given the current corn bushel prices. But unfortunately, Petrobras is vertically integrated in oil, and owns only distribution in ethanol, so it is actually hurting ethanol in favor of gasoline for its own profitability.

VeraSun Energy and the Ethanol Debate

U175914, you are incorrect when you say ethanol represents a small amount of its transport needs. This year, ethanol will be more consumed than gasoline, and the entire opposite happens in Brazil: Petrobras has been subsidizing gasoline because ethanol is too competitive -- prices have been frozen to 2005 levels so Petrobras can sell its inferior crude-based products internally rather than exporting them at a discount.

Granted Diesel is a big part of Brazil's oil consumption, and its soy biodiesel program is every bit a mistake that the US Corn Ethanol is. The push to use grain biofuels overall is a gigantic mistake that the entire world is paying for.

VeraSun Energy and the Ethanol Debate

Scott, although conditions for harvest of sugar cane are terrible, this is being largely automated over time by the big producers. I seriously doubt the use of tractors will significantly reduce the 8:1 EROEI because that comes mostly from the lack of use of fertilizers, irrigation, and burning of bagasse in distilling.

VeraSun Energy and the Ethanol Debate

Ethanol per say is not the problem, but Corn ethanol is a terrible, boondoggle. It has a net energy yield of 1.3 compared to 8 for Brazilian sugarcane ethanol -- making it truly masturbatory especially since it is being planted in the world's most productive farmland. It displaces other crops such as soybeans and wheat, and unquestionably has contributed to high food prices.

Contrary to what critics say, Brazilian ethanol only takes up 1% of its farmland and is grown far away from rain forests so it does not cause significant deforestation. So corn ethanol should be abandoned immediately, tariffs should be dropped, until a viable alternative from cellulosic sources are commercialized in scale