USDA charts impact of changing oil prices on Brazilian sugarcane, ethanol production: new report

July 3, 2016 |

In Washington, the USDA’s Economic Research Service released a new report “Brazil’s Agricultural Land Use and Trade: Effects of Changes in Oil Prices and Ethanol Demand.”

In a high-price scenario, the oil price rises 45 percent by 2024. With increasing oil prices, sugarcane area increases by 946,000 hectares during the forecast period, or about 11 percent of current sugarcane area. This expansion helps boost sugarcane production by 75 million tons as well as the share of sugarcane milled for ethanol production.  With higher crop production costs, and lower returns for most crops, the area planted to food and feed crops other than sugarcane falls by an annual average of 12,300 hectares in 2015-19.

In a low-price scenario, the oil price decreases 30 percent below the reference price in 2015, and ethanol use in Brazil falls by an average of 16 percent annually in 2015-24. Over the same period, expected returns to Brazilian sugarcane producers would fall about 10 percent annually, leading to a decrease in production and freeing up nearly 4 million hectares of land for other agricultural uses. With lower oil prices, additional arable land is brought into eld crop production (2.5 million hectares), livestock production (1.1 million hectares), and permanent crop production (46,000 hectares), while the remaining 335,000 hectares remain fallow.

According to USDA, a prominent issue related to land-use changes in Brazil is the westward expansion of agriculture into the country’s frontier region, which includes the surrounding Cerrados savannah. The conversion of range, pasture, and other land to cropland in Brazil is due not only to rising domestic and international food demand but also to rising ethanol production, expanding demand for sugarcane, the main feedstock used in Brazil. In fact, sugarcane area increased 35 percent in the period 2008-14, and sugarcane is now planted on 14 percent of Brazil’s total cropland (65.4 million hectares).

Download the report here.

Category: Research

Thank you for visting the Digest.