A few months ago, some Brazilian ethanol traders seemed to have had the brightest idea of their lives: to import cheap ethanol from the United States and sell in Brazil for higher price, as domestic stockpiles were going down. The result was that imports multiplied eightfold between November and February. Imports were so high that the result was flooding the local market. Prices remained high in December and through the first week of January, touching 2.07 reais, but then the market tumbled as new supplies arrived, according to data compiled by the University of Sao Paulo’s Cepea research arm says Agweb.
And it was not only small traders that were caught in the trap: some big ones also partipated in the rush: Raizen (a joint venture of Royal Dutch Shell Plc and Cosan); Copersucar (which controls U.S. biofuel marketer Eco-Energy) and Biosev SA, a unit of trader Louis Dreyfus Co.