What we know about the Brazilian presidential situation and ethanol prospects?

September 5, 2014 |

As many know, Brazilian presidential candidate Eduardo Campos died in a tragic August 13th plane crash, and in recent weeks, Marina Silva has emerged as a new candidate, and it now looks from polling data that she has the support, were the October 5th election held today, to move into an October 26th run-off with President Dilma Rousseff — and, in fact, topple Rousseff.

It’s a long ways until October 5th — but here’s why ethanol-oriented stocks are already rising on the prospects. Rousseff has been attempting to battle inflation by holding down gasoline prices — leaving ethanol at uncompetitive prices and surviving as an industry mostly on blending mandates.

Right now, blending rates are at 25 percent (lifted from 20 percent in April) — but fewer than 25 percent of Brazilians are choosing ethanol for flex-fuel cars owning to the price differential. All of which has Brazilian ethanol producers making as much sugar as they can, and seeking export markets.

Meanwhile, Silva is an unabashedly “green” former environment minister who has stated in her overall plan that ethanol “cannot be sacrificed in its ability to compete in the fuel market because of a policy of controlling gasoline prices that undervalue” renewable fuels. Her surge in the polls has inspired increased hope around the industry — in fact, Cosan stock has jumped 26 percent since Silva emerged as the replacement candidate for Campos.

Meanwhile, the Brazilian Senate this week voted to raise the ethanol blending mandate to 27.5 percent and the biodiesel limit from 5 percent to 6 percent — but President Roussef has yet to approve the legislation.

More on the story.

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Category: Fuels

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