Brazilian Cars High on American Alcohol

by Bertel Schmitt

Published: September 17th, 2011

Around two thirds of the oil used in the United States is imported. Now, something is done to offset this energy trade imbalance ever so slightly: Ethanol, the stuff that is supposed to save the U.S. from foreign oil dependency is shipped out of the country.

Who buys it? Brazil, the land where cars drink alcohol to drive. Demand in Brazil is growing at a 5-10 percent annual pace. This year, bad weather has resulted in a poor harvest of sugar cane, the main raw material for Brazilian fuel.

Enter the American farmer and enterprising Japanese trading houses

Japanese trading company Itochu will be buying U.S. bioethanol and export it to Brazil. According to The Nikkei [sub], Itochu operates a bioethanol production and sales business in the northeastern Brazilian state of Tocantins and the southeastern state of Minas Gerais jointly with U.S. agribusiness giant Bunge Ltd. Soon, Brazilian cars will run on American corn.

#BertelSchmitt #Brazil #Ethanol #Japan

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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13 comments

Chuckrs on Sep 17, 2011

So we can get rid of the subsidies, right? President Golfsalot can trade the stuff for Brazilian oil, discovered and developed with financing from the US. WSJ 08/18/2009 - US Ex-IM Bank plans lending to Petrobras.

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- Moorewr on Sep 17, 2011
  
  Who is President Golfsalot? The only one I can think of that fits the bill is GW Bush, and I'm unclear why I would care what he does any more.
  
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- Tced2 on Sep 17, 2011
  
  I don't who deserves the title "golfsalot". But President Bush played 24 rounds of golf in 8 years. President Obama has played 70-some rounds of golf in about 2 1/2 years of his presidency. Reach your own conclusion. Ethanol is a poor way to obtain energy - it probably takes more energy and resources to obtain energy from ethanol than oil.
  
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- Pch101 on Sep 17, 2011
  
  Energy is a commodity good sold on world markets. Sellers will sell it to whomever has the money to pay for it. The buyer's ZIP code (or lack of a ZIP code) doesn't matter. The US exports oil, while simultaneously importing it. Net-net, far more oil comes in than goes out, but that doesn't mean that there isn't anything being sent abroad. Individual transactions doesn't necessarily conform with the averages. That's just how markets work. And I don't see how any president would have the authority to ban ethanol exports. What justification would the government have for doing that?
  
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- Moorewr on Sep 17, 2011
  
  @tced2 I still don"t see why I should care. Why are you counting presidential golf rounds? Should I look up whether Boehner or Biden has a better handicap? Will that change the price of gasoline?
  
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- Tced2 on Sep 17, 2011
  
  @tced2 I don't count golf rounds; It's what a number of news organizations have reported. The president doesn't totally control gasoline prices but he does have significant control over several significant factors.... -ethanol subsidies (which distorts the market and is germane to the current topic) -approval of oil drilling permits (which affects supply of oil)
  
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- Moorewr on Sep 17, 2011
  
  @tced2 Congress passes ethanol subsidies - and personally I'd rather see them ditch the entire farm bill then pay any more money to put corn in my gas tank. And congress decides where drilling permits can be issued (although the President can decide whether to issue them where congress has permitted it). Ethanol from waste material or grasses might make some sense; corn ethanol is the single dumbest thing we could have done, so of course it has bipartisan support.
  
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- Chuckrs on Sep 17, 2011
  
  @Pch101 Energy is fungible. US subsidies and loan guarantees should not be. I have no problem with US ethanol being sold on world markets. As a taxpayer, I do have a problem with paying subsidies for it to be produced here and sold at world prices elsewhere. End the subsidies. Don't ban exports. I don't think any President of any political stripe should be able to do that. re: the Golfsalot crack. This President has played far more rounds of golf than he has submitted budgets to Congress. Congress makes the budgets, but traditionally, the President sets forth what he wants as the Executive branch leader. Take the crack as a metaphor that I don't think this President is paying enough attention to his job.
  
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- Moorewr on Sep 17, 2011
  
  @Pch101 chruckrs: that's silly. I could quote the number of vacation days George W. Bush took per year v. Obama if it mattered - which it doesn't. Suffice to say it was rather a lot more, and neither for their many faults can be critiqued as being un-engaged with their jobs. I think that exhausts the topic of presidential golf, at least as it relates to cars.
  
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Ixim on Sep 17, 2011

Those US ethanol subsidies may be part of what makes this deal profitable. Of course, this makes a dent in the ongoing surplus of [subsidized] US-produced ethanol. I don't know about President Obama, but former President Bush was a big fan of ethanol. Hey, anything that may keep that stuff out of my gas tank.....lol.

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Hank on Sep 17, 2011

So what's the impact at the US pumps, since E10 rules the day, at least up here in the NE?

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Marcelo de Vasconcellos on Sep 17, 2011

Bertel, Thoug weather is a factor, it's not the main one. Te main factor is sugar prices. Due to (among other things) relentless growth in consumption in both India and China, the international price is attractive to producers. So much so that they prefer to sell abroad. In spite of allsubsidies. Not to mention "promises" and "commitment" of producers and government to the Brazilian citizen. You see, for a myriad of reasons (funding for campaigns, "in-house" politicos, lavish spreading of money), the s-o-b sugarcane growers can and do get away with murder. Basically only in S. Paulo state (the main beneficiary and promoter of this underhanded scheme) is ethanol advantageous against gasoline. I for one, thoug I drive a fully flex fuel car have not filled up with ethanol for more than 2 years. However, as I'm ot in SPaulo it doesn't matter that I pay more than internaational prices for the shameless concotion they sell as gasoline to Brazilian consumers. Sad tropics.

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- Autobraz on Sep 18, 2011
  
  If it makes you feel any better, Marcelo, this year Summer here in Vancouver lasted for about 1 month...
  
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