BRAZIL ETHANOL INDUSTRY

In agriculture circles, there is much discussion about Brazil, and the competition (threat) that the rapidly increasing Brazilian soybean industry poses to the future of soybean farming in the United States. However, there is not near as much discussion about the direction that Brazil has taken in the ethanol industry, and how it is vastly different than the approach taken by the United States relative to the development and use of alternative fuels. Back in 1973, when the Middle East oil embargo caused world oil prices to rise sharply, Brazil realized that they were extremely dependent on foreign oil to meet the country’s gas and fuel needs. About 80% of the fuel used in Brazil at that time was imported. Today, Brazil is nearly self-sufficient in meeting its fuel needs for the country. Brazil invested heavily during the late 1970s and early 1980s into ethanol production, primarily from sugar cane. At the same time, Brazil legislated a requirement of 25% ethanol in all fuel, and provided incentives for auto makers to develop vehicles that were ethanol-friendly, and ran on 100% ethanol fuel. Some of these vehicles were later adapted to be flex-fuel vehicles that could run on either ethanol or gasoline/ethanol blends, allowing for more adaptability when fuel supplies and fuel prices change. Today, over 40% of the fuel used in Brazil is ethanol, compared to % of the fuel in the U.S. being ethanol. From the farm fields to the city streets, vehicles are running on ethanol-blended fuels, with many running on 100% ethanol.

In the U.S., our Congress continues to struggle for the third year in a row to pass a comprehensive Energy Bill, and the large oil companies and auto makers continue to fight efforts to develop greater use of home-grown alternative fuels in the U.S. several Senators and members of Congress from California and the East Coast States continue to fight the development of ethanol, biodiesel and other alternative fuels in the U.S., and are willing to use more expensive, higher polluting fuel alternatives. Even though the U.S. is the second largest producer of ethanol in the world, behind Brazil, ethanol production and usage in the U.S. is a very minor segment of the total fuel industry in country (3%). Primarily, the U.S. has viewed ethanol as a minor oxygenate replacement to improve air quality as mandated by the Clean Air Act, and not as an alternative fuel source to replace the ever-increasing U.S. dependence on foreign oil. Brazil took a different approach to a national energy policy three decades ago, and today, Brazil is nearly independent of foreign imports to meet their country’s fuel needs, and the people of Brazil are reaping the benefits of lower fuel costs and higher air quality!

Editors note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.