Contents. 22 Interview. 42 Speakers and. Views about the sugar-energy industry. Welcome to the 2013 Summit ELIZABETH FARINA

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4 Contents CEO Elizabeth Farina CORPORATE COMMUNICATIONS DIRECTOR Adhemar Altieri 2013 SUMMIT MANAGER Solange Buzzetti photos Niels Andreas Tadeu Fessel Editing, Production and Art 3CX Editorial & Comunicação 8 FROM THE PRESIDENT S DESK Welcome to the 2013 Summit ELIZABETH FARINA 12 PERSPECTIVE Betting on 2G ethanol 10 Quotes Views about the sugar-energy industry 22 Interview Elizabeth Farina and her main challenges Director Píndaro Camarinha production manager Cesar Camarinha executive Editors Caio Camarinha and Erika Campos EDITOR-IN-CHIEF W.F. Padovani Editor Leonardo Zanon 30 History The Flex-Fuel saga staff writers Adriana Proença, Evelyn Nemer and Fernando Mello Design Bruno Lodovichi, Hélio Siecola and José Maria Faustino (Assistant editors), Paulo Woodward and Sylia Rehder (Designers) 4 PROOFREADERS Anselmo Cheré and Valdinei Dias Batista cover Hélio Siecola/Caio Camarinha translation Brian Nicholson MANAGING EDITOR Leonardo Zanon (mtb ) printing Stilgraf circulation 3,300 copies 3CX c a m a r i n h a e d i t o r i a l & comunicação COLUMN Flex-Fuel cars: evolution and success 40 High tech Biotech products 42 Speakers and Moderators Specialists and Personalities that make the Summit what it is

5 The sugarcane production presents many challenges. And Syngenta is committed to overcome them. Sustainable sugarcane production increase requires a complete understanding of the crop. We integrate technologies and agronomical knowledge to address productivity challenges throughout the crop cycle. Our specialist team works with our customers to install, protect and expand the sugarcane potential, from nurseries to harvesting. We are sugarcane! Syngenta, SYNGENTA is a trademark of a company from the Syngenta Group.


7 technology: The chemistry of innovation Chemistry unveils new paths and exciting possibilities as it trends towards the future and forever changes the world as we know it. Constantly spearheading evolution and revolution, chemistry and technology work hand-in-hand to reach new and exciting results by the minute.

8 FROM THE PRESIDENT S DESK unica Elizabeth Farina CEO BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION - UNICA A productive GATHERING I want to welcome everyone to another edition of the Ethanol Summit, one of the world s most important events dedicated to renewable fuels and products Just a decade ago, Brazil began an experiment that, in the space of only a few years, was to become one of the most effective programs known for the reduction of greenhouse gas emissions. I refer to the introduction of flex-fuel cars, a technological innovation that has put Brazilian consumers in charge of our planet s largest program for replacing fossil fuels with renewables. Thinking about the new directions of this program through the next 10 years will be one of the most important debates in this fourth edition of our now traditional Ethanol Summit, along with other issues of great importance for the future of the industry. These include commercial-scale cellulosic ethanol and the increasingly broad range of new uses and products that can come from sugarcane, from bioplastics to fine chemicals, specialty resins, packaging and jet fuel. 8

9 An excellent opportunity to discuss key issues for the sector and to foster interaction between different players, contributing to greater coordination between the public and private sectors, and between countries As in previous editions of the Summit, we expect a large audience: participants from all continents who are highly representative of the many strands that comprise the supply chain surrounding sugarcane. During these two days everyone will have the opportunity to talk with experts, business leaders and government officials about an extensive agenda that becomes more complex and challenging with each passing year. There is now wide recognition of the substantial environmental benefits that come from producing and consuming ethanol in place of gasoline, but there is still a long way to go for these benefits to be more widely and sustainably enjoyed by the population. Questions of a regulatory nature will be an important topic at the Summit, because these are what will ensure the competitiveness of renewables against fossil fuels. It is only through close cooperation between consumer and producer countries that we will achieve the necessary success in establishing a truly global program for ethanol and for biofuels in general. Forums such as the Ethanol Summit offer an excellent opportunity not only to discuss issues like these, but also to foster interaction between different players. This contributes to greater integration between the public and private sectors, and between countries. This is my expectation as I welcome everybody to another edition of what has become one of the world s most important meetings dedicated to renewable energies and products, and in particular those derived from the wonderful plant that is sugarcane. I wish you all a most productive event! 9

10 quotes Ethanol needs to have a much stronger presence than it has today. We can certainly become the top producer in the world April 23, 2013 Guido Mantega, Brazilian Finance Minister The only investment in first generation ethanol that we have authorized is in Brazil, where it will not interfere with food production or affect the integrity of forests May 13, 2011 Jorma Ollila, Board Chairman, I am an absolute booster of ethanol May 22, 2013 Royal Dutch Shell Our great warhorse is the return of ethanol September 11, 2012 Ethanol has to have a ressurgence, return to being everything that it was before, because if there s one thing that we know how to make, it is ethanol April 25, 2012 Maria das Graças Foster, President of Petrobras Ethanol is of great importance to the Brazilian economy, because this is the country that advanced the most in terms of using the sugarcanebased fuel, something that is recognized by various countries around the world April 23, 2013 I believe Brazil is now being called upon, in the case of ethanol, to take another step forward by expanding investments in the industry. This will be our next moment June 14, 2012 We re very proud of our agriculture and our clean energy program based on ethanol September 21, 2011 President Dilma Rousseff 10

11 I m a fan of biomass because it s a type of energy that is predictable from May to October May 23, 2013 Hermes Chipp, General Director of the National Power System Operator ONS The expansion in ethanol consumption over the past decade has been enormous. In spite of short term difficulties, the tendency is for that to continue, with a growing role for new technologies May 4, 2012 Toby Cohen, Diretor at Czarnikow, U.K.Reino Unido Brazil has performed in the past, and continues to perform, a key role in favor of the global advancement of the ethanol industry and the establishment of more favorable conditions so that this Market can be structured in global terms April 11, 2012 U.S. Senator Barbara Boxer Chair of the Environment and Infrastructure Committee The use of straw and bagasse by sugarcane mills to generate electricity can in fact double by the end of the decade, reaching, overall, a potential that is equivalente to the power output of a major hydro plant like Itaipu" April 23, 2012 George Vidor, in his column in the Rio de Janeiro daily O Globo It s not acceptable for ethanol to be reduced to little more than a gasoline additive July 11, 2012 Miguel Rossetto, CEO, Petrobras Biofuels pictures for disclosure 11

12 Perspective RAW MATERIAL OF THE FUTURE? Second-generation or cellulosic ethanol, produced from plant waste and other types of biomass, is a promise that s renewed afresh every year. Interest in the subject has grown with the appearance of the first commercial-scale production plants. The United States is the leading investor, and the first commercial plant in Brazil is scheduled to come on stream in H ere comes 2G ethanol. The second generation of the fuel, also known as cellulosic ethanol, is made from plant waste such as leaves, stems, tree trimmings and wood chips. Alternatively, in the case of Brazilian sugarcane, it can be extracted from the cellulose contained in the bagasse of the raw material. And the signs are that the market could enjoy a new lease of life in the coming years. Investments to develop the new technology in Brazil already exceed R$2 billion. In the fierce and world-wide competition to develop the new technology the U.S., Japan and Europe are also in the running Brazil is one of the few countries that can produce the new ethanol at a competitive cost. A survey by Bloomberg New Energy Finance suggests that the price of ethanol produced from waste could be more competitive than that of the conventionally- -produced fuel within three years.

13 tadeu fessel The Brazil effect: the country can produce new ethanol at a competitive cost 13

14 Perspective Alfred Szwarc, emissions and technology consultant at UNICA niels andreas Brazil s first commercialscale cellulosic ethanol plant is being built in the Northeast, at São Miguel dos Campos, 60 km from Maceió, by the GranBio biotechnology company and is expected to open in early It represents a major breakthrough for the country. This plant will come on stream with an output comparable to firstgeneration units, and will encourage other companies such as Petrobras and Raizen to follow similar paths, said Alfred Szwarc, a consultant in the area of emissions and technology at UNICA. It s the first step towards integrating second-generation ethanol into the country s supply chain. Second-generation ethanol has been the goal of the biofuels industry for quite some time. In the United States, for example, there are some 70 cellulosic projects spread across 20 states, with billions of dollars of private investment in the sector. In Italy the Mossi & Ghisolfi group (M&G), a major Italian petrochemical company and one of the pioneers of cellulosic fuel, has already launched a commercial-scale plant. China is also going down the same path with support from Novozymes SA, a Danish company that is engaged in ethanol research and development in the United States, Brazil and Denmark. According to the November 2012 edition of the MIT Technology Review magazine, adding a cellulosic ethanol production line to a plant that already produces ethanol from sugarcane or corn is an option that reduces the costs of long-term capital. Last March KiOR announced the shipment of cellulosic diesel from its plant in Columbus, Mississippi, in the United States. It was the first commercial production in that country of a fuel from non-food 14

15 raw materials. KiOR produces its fuel from wood chips that previously went to a paper mill, now closed down. The project can be a model for injecting new life into other communities that have lost their papermaking industry. Former U.S. Secretary of State Condoleezza Rice, who is a member of the board of KiOR, said that the company is changing the U.S. energy equation by innovating and selling a completely new generation of hydrocarbon-based diesel and gasoline fuels. By turning the promise of cellulosic biofuels into a reality, KiOR is showing that these fuels are an attractive option to reduce American dependence on foreign sources of energy. And there s more. This year Ineos Bio, which is part of a European chemical company, is scheduled to bring a cellulosic plant on line in Florida. Initial production will be around 30 million liters of fuel, made from forestry waste. In Nevada, Iowa, DuPont Industrial Biosciences is building a US$200 million refinery to produce around 111 million liters of fuel a year from corn stalks and leaves. Another large plant is being built in Emmetsburg, also in Condoleezza Rice, former U.S. Secretary of State Investments to develop the new technology in Brazil exceed R$2 billion tadeu fessel Research: second-generation ethanol is a long-standing goal 15

16 Perspective 16 The new technology can increase ethanol production in Brazil by 50% through the use of sugarcane bagasse and straw, without expanding the cultivated area mark mc donald - Thinkstock Sugarcane: bagasse will also produce ethanol

17 tadeu fessel New revolution: major producers are thinking globally Iowa, at a cost of US$250 million. It s a joint venture between DSM Advanced Biofuels of Holland and Poet, one of the largest U.S. producers of ethanol based in Sioux Falls, South Dakota, together with 27 plants in the region where the lion s share of the ethanol sector is located. Spanish multinational Abengoa will produce fuel at a plant in Kansas, using a combination of agricultural and wood waste. And in Oregon, ZeaChem is working with a neighboring reforestation farm on plans to turn woody biomass into fuel. In Italy, there has been great interest in the Beta Renewables SpA plant, built by Mossi & Ghisolfi at Crescentino in the Piedmont region, in the north of the country. It was a surprise, Guido Ghisolfi, CEO of the mega-company, told the Ethanol Producer magazine in March of this year. We expected an average of 10 groups per month, interested in seeing our installations, but what happened was the visit of 10 groups per week. And it has not just been consultants and journalists, but directors of industrial companies on five continents. The cellulosic technology company Beta Renewables is a joint venture between M&G, TPG Capital and TPG Biotech. According to Ethanol Producer, Novozymes, a Danish company that develops enzymes, took a stake in the venture in October with a cash investment of US$115 million. Ghisolfi, who will participate in the 2013 Ethanol Summit, organized by UNICA, showed that he is very confident about the future of the new fuel. Up to now Brazilian sugar mills have produced ethanol from the fermentation of the sucrose to be found in sugarcane juice. Second-generation ethanol can be made from Guido Ghisolfi, CEO of Beta Renewables SpA 17

18 Perspective The search for competitiveness in Brazil could lead to greater technological innovation to reduce production costs cellulose from any part of the plant leaves, straw or bagasse. The Sugarcane Technology Center CTC in Piracicaba, São Paulo, is the world s largest sugarcane research center and is in the race to achieve viable production of 2G ethanol. The public sector has also rolled up its sleeves and joined the fight, specifically through the efforts of technicians at Embrapa Agroenergia in Brasília. The Brazilian Development Bank BNDES created a special credit line in 2012 to speed up the development of commercial-scale secondgeneration ethanol. This has been used by several companies that are active in developing the product, such as Abengoa and DuPont. Cellulosic ethanol has great potential to expand because it does not depend for its manufacture on food production or expansion of the area planted with sugarcane. Rather, it depends on reusing waste from ethanol and sugar production, both of which are already abundant. The future will be governed by the search for fuel competitiveness. In general the cost of producing conventional first-generation ethanol in Brazil is lower than in other countries, said Szwarc. This means that the search for competitiveness in Brazil could lead to greater innovation in technologies to reduce the cost of production. Szwarc believes that other companies will start using the new technology by 2020, leading to increasing volumes of production. This type of fuel will have great acceptance in the market because of its sustainable production. I m optimistic and my bet is that a significant share of total production will be second-generation within a decade, he said. A survey by Bloomberg New Energy Finance focusing on the price competitiveness of 2G ethanol suggests that the main cost factors for the embryonic cellulosic ethanol producers in 2012 were raw materials and the enzymes required for the enzymatic hydrolysis process that converts cellulose waste into ethanol. However, technological progress is significantly reducing operating costs by as much as 70% since divulgação 18 The Sugarcane Technology Center in Piracicaba, São Paulo: the world s largest sugarcane research center is in the race for viable production of 2G ethanol

19 The American wave The development of cellulosic fuel in the United States is being driven by federal mandates, the contentious food versus fuel debate and the continuing high price of regular gasoline. Moreover, the production and use of cellulosic fuel generates significantly lower amounts of greenhouse gases than fossil fuels. Scientists have found new and better ways to break down plant detritus and convert it into fuel. And research continues on new sources of fuel and on land that previously did not produce crops. A study by Michigan State University examined the use of wild grasses on marginal lands and found that they could potentially provide as much biofuel as food crops while reducing the amount of CO2. In 2007, Congress encouraged the ramping up of cellulosic fuel production when lawmakers mandated that refiners must use more of that type of biofuel in their blends. Industry officials estimate that the cellulosic biofuel industry could be producing up to 925 million liters per year by the end of While that is less than Congress anticipated in 2007, it is nonetheless significant progress in an industry that didn t exist when the first production goals were formulated. In general terms, the U.S. government s Renewable Fuel Standard (RFS2) will require the oil industry to blend 36 billion gallons of ethanol into its products by The need for cellulosic fuel in the United States became even more acute after last year s drought. The prolonged dry spell drove up the price of corn and consequently animal feed leading livestock groups to question the amount of corn being used to produce ethanol. Unlike the conventional ethanol produced from corn, cellulosic ethanol is derived from corn plant residue that previously was seen as having no value. Cellulosic advanced biofuel is Tom Vilsack, United States Secretary of Agriculture here and it s here to stay, U.S. Agriculture Secretary Tom Vilsack said at an event in Iowa in March, according to the Associated Press. At the same event DuPont announced its guidelines for the collection of corn plant material and preservation of soil quality. This is an industry that is making America more energy secure. It s creating jobs. It s helping to reduce the cost of gasoline for consumers and it s reducing our dependence on foreign oil, Vilsack said. Bob Nichols The leaders in this process will have to find ways to reduce the initial investment in the plant, so reducing the risk and attracting cheaper financing, said Harry Boyle, an analyst at Bloomberg New Energy Finance. Technological improvements will of course influence the logistical planning, and this will be a demonstration of the sector maturing. At long last, cellulosic ethanol is emerging as a promising energy source. with the new technology ethanol production can be 50% greater in Brazil without expanding the planted area, but simply by using the sugarcane bagasse and straw. Ethanol from Brazilian sugarcane is classified by the U.S. Environmental Protection Agency (EPA) as an Advanced Renewable Fuel. Sugarcane is renewable and grows fast. It absorbs more CO2 from the atmosphere than other plants. Sugarcane ethanol is recognized as advanced by the EPA because it has been proven to reduce greenhouse gas emissions by at least 60% compared to gasoline. Harry Boyle, an analyst at Bloomberg New Energy Finance bloomberg 19

20 INTERVIEW 10Questions for Elizabeth Farina fotos unica DElizabeth Farina has been the CEO of the Brazilian Sugarcane Industry Association (UNICA), the principal organization representing Brazil s sugar-energy sector, since November of But such has been the intensity of these few months that Farina, an economist, is given to phrases such as it feels like I ve been here five years. As the first woman to command a major agribusiness association in Brazil, Farina has devoted her time mainly to establishing effective and reliable channels of communication with the various areas of government that are most relevant to the industry. She is optimistic about the sector, but very much aware that its obvious potential to benefit society as a whole will be achieved only with much effort, persistence and patience. 20

21 What was your first reaction after accepting the invitation to head UNICA? Excitement. That was the main reason that led me to accept the invitation. I was excited about the idea of 1 working in a very challenging industry but one that s a good cause, of utmost importance to Brazilian society. The idea of leading a private sector association of such size and importance would also be a new experience for me. This was an important factor, because I had spent many years studying agribusiness in PENSA, the Center for Agribusiness Knowledge at the University of São Paulo. The subject of private interest associations was very important and in fact formed part of my professorial thesis. This was significant in my academic career, and so taking on an association would also be the opportunity to put into practice what I had studied for many years at university. This is not to say that I would make UNICA a laboratory, but rather to explain that after writing, publishing and giving advice in the area, this is an opportunity for concrete achievement and to put into practice something that has existed in the realm of ideas. And what you found at UNICA has it matched your expectations? My experience with associations was in no way related to professional 2 management until I came to UNICA. In general, associations have limited staff and a very narrow focus. The surprise at UNICA has been the breadth of activities and the very professional structure. I was extremely well received and it is always good to be welcomed into a friendly atmosphere, even with various questions and the concern of those who were wondering who is this person who could change everything that we are currently doing? But I found an extremely professional environment and was well received. It exceeded my expectations. Now that you have assessed the situation, what is your evaluation of the sector as seen from within UNICA? I had been following events (in the sector), but the challenges are 3 proving to be much greater than they appeared before I made the decision to dive headlong into such questions. Being such an important sector in several areas, it faces all sorts of challenges that a sector I was excited about the idea of working in a very challenging industry, but one that s a good cause, of utmost importance to Brazilian society 21

22 INTERVIEW Renewable energies are not just a matter for debate they re a reality that is here to stay worldwide and Brazil is a major player could possibly have, be it in agriculture, industry or labor. The relationship with the international community is also complex. Hard-won space involving exports to the United States, for example, requires special attention. Our efforts in Europe proceed as if we already had large exports there. That s not yet the case, but we know that the potential there is significant. I sense a complexity that carries us beyond the relationship with associations similar to ours. We have to deal with the European Parliament itself and to keep abreast of political and economic developments in the United States. It s far more complex than I imagined before experiencing UNICA day-to-day. Within Brazil, our relations with the legislature, the executive and other spheres of public administration are more ample than I imagined. We interface with numerous players about numerous demands, and this makes the challenge even greater.. How do you see the prospects for the sugarcane industry? It s a sector with immense potential and opportunities. Renewable 4 energies are not just a matter for debate they re a reality that is here to stay worldwide and Brazil is a major player. This is a concrete agenda for countries; one that requires public policies if it is to become a reality, to effectively create renewable energy alternatives. The challenges to address these opportunities are no less than the opportunities themselves, because they depend on private investments that involve training, management, research and development. All this requires a longterm vision of what will be the renewable energies of the future, and the truth is that there is little clarity on these issues, here or elsewhere in the world. While renewable energy is here to stay, it s still a matter that s in development, under construction. Seizing these opportunities is no small challenge, but I m optimistic because it s simply not something that can get pushed into second place. I understand that we will be successful if we prepare a good strategy, but this itself is no simple matter because there are initiatives all around the world, and they are not always consistent or moving at the same speed. 22

23 Actions must be compatible if they are to have a chance of success. This is a challenge for those who are responsible for public policy in each country. It is particularly a challenge for an organization like ours in Brazil, one that seeks the success of an activity that has every chance of being compatible in terms of the private sector, in line with public interest and supported by very heterogeneous companies. I see all this very positively. How do you think businessmen in the sector see their industry? I think the private sector is rather perplexed, because it sees 5 opportunities that need to be seized, it sees a convergence of public and private interest, and it sees several contributions that could be made in terms of the environment and job creation, but at the same time it feels that it is really difficult to realize all this. The country needs to leverage investments. This is something that could impact the supply chain very positively, but within the government it comes up against a lack of definition of directions, a lack of established rules that would favor the realization of this potential. The sector has made progress in the last six months; the period in which I have followed events and have been able to engage directly in discussions. People tell me we have moved forward in terms of dialogue, in constructing the political channels needed to promote dialogue. This is an industry with significant financial exposure a consequence of the recent past and there are still major obstacles to overcome in the area of productivity. We are gradually regaining competitiveness, especially in the agricultural area. It s an industry that requires huge investments. This raises important questions about the ability to generate a return on investment, which does not depend only on entrepreneurial ability. There is a wide degree of heterogeneity among the businessmen in the sector, both in terms of their financial condition and their management procedures. This means that some can grow in a harsh environment, while others simply die on the beach and close down, or sell their assets. Every day brings something new. It s a market dynamic that permeates the entire economy, but it seems to me that it is stronger in the sugarcane industry. This increases the perplexity. I m in an industry that has positive aspects. It contributes significantly in matters of great public interest, but does not receive the support that I had expected. Even when the ethanol price is relatively favorable, the consumer takes his time about returning to ethanol when he goes to fill his tank. Even if you explain that kind of attitude in many rational ways it causes perplexity among entrepreneurs. My perception is that the dialogue is growing and intensifying. This has produced a result that i consider to be of great value, which is trust 23

24 INTERVIEW Your work in Brasilia has been pretty intense. How do you assess these contacts? Once again, I would say that I m optimistic. My perception is that 6 the dialogue is growing and intensifying. This has produced a result that I consider to be of great value, which is trust. This is not to say that trust was not deserved before, but for some reason there were a lot of reservations about the needs of the industry. The government seemed to think OK, I ll enact policies, I ll give these people encouragement, but will the sector respond positively? If I go out and announce something, but nothing happens, then how am I going to look? On the other hand, the sector also has reservations about public policies, because it has been caught on the wrong foot and left without alternatives. So as soon as I took over, I sensed this lack of mutual trust. I feel that things are improving gradually but that s always the way, given that trust is earned slowly, it s a repetitious and never-ending matter. This improvement can be seen in a more frank and open dialogue. My understanding is that there is a large body of opinion that thinks ethanol is important, and that counts on the sugarcane industry for cogeneration. But much remains to be done. We must press on with this dialogue so that confidence is preserved and expanded. What needs to happen for the sector to start growing again? I believe in a resumption of growth, once we overcome the barriers we 7 face today, but there s no simple secret, no single action that can trigger a virtuous circle of investment and growth in the sector. We will need a series of actions and Brazil is not alone in this challenge. Globally, the renewable energy industry faces the enormous challenge of expanding supply at costs lower than those of fossil fuels. When we have the prospect of increasing costs for fossil fuel, either by depletion of reserves or the growth in demand for energy, it helps a lot. If fossil fuels become more expensive, this will make it easier to do things that have a positive environmental impact. This is not what we are seeing at the moment, with oil from alternative sources becoming available at lower prices. What is happening is that the horizon for fossil reserves is extending. This results in falling costs, especially in the short term. The challenge remains, and it concerns a much broader topic than the prospect for growth of the sector, because this growth sustainable and less cyclical than it has been depends largely on the availability of and horizon for fossil fuels. Today, this horizon means that there is an urgent need for public policies that can get renewable alternatives moving faster, from the point of view of preservation, quality of life and urban Globally, the renewable energy industry faces the enormous challenge of expanding supply at costs lower than those of fossil fuels 24

25 There s a high likelihood of resumed growth in the sector, provided there are public policies in this direction for more resistant strains of sugarcane, and always looking for greater productivity, be it in sugar or ethanol. I feel positive about the resumption of growth. I know it won t be easy, but I see all sides making the effort. My conclusion is that there is a lot of work ahead for UNICA, for the government and for companies, if this growth is to happen and be sustainable. mobility. All this means there s a high likelihood of resumed growth in the sector, provided there are public policies in this direction. I believe that this understanding is gaining traction, both within the Brazilian government and in international commerce, opening up prospects for the Brazilian industry to participate in other markets. This means that the sector is investing in existing plants rather than new plants. It is investing in logistics and infrastructure, which are very important because we need to increase productivity even if there are government measures. At the end of the day, every sector must have a process of permanently increasing competitiveness, and this means that there has to be renewal. In this sense I see our industry vigorously searching for solutions such as new sugarcane varieties for the frontier agricultural areas, research What did you discover about UNICA s activities that you had not been expecting? What I had not expected, or what surprised me, was the range of 8 needs met by the different areas in which UNICA operates. The UNICA that you see from the outside, rather than the inside, is an entity that is concerned about the institutional environment in which businessmen operate. What you see from the outside are the relations with the federal and state governments. But once you get inside UNICA, you find important activities to give companies guidance in the areas of labor and the environment, and in their relations with certification agencies. You see very dynamic work in the area of communication, work that is a very important part of a surprising variety of activities. But you only see all of this once you re on the inside and you can really size things up. That s when you begin to understand UNICA s wide range of activities. This was what surprised me most.. 25

26 INTERVIEW Has being the first woman to run UNICA been a help or a hindrance? Well, it certainly hasn t been a hindrance. Actually, I d say it 9 has helped, because people are curious to know what a woman is doing in the midst of so many sugar and ethanol producers. This ends up generating a certain empathy, a certain positive curiosity about a supposedly macho sector that chose a woman to run its association, and to hear what this woman has to say. But after the initial contact, that s when the real work starts. So the fact of being a woman is not a drawback; it helps at the beginning but it is not something that makes the difference between water and wine it s not going to determine success. What are the main challenges for UNICA and the sugarcane industry that you have identified as priorities going forward? First, we have a lot of work to do in the area of communication, 10 addressing society, the government and the supplier. One of my surprises about the sector has been how modern it is, and this is related to communication. The fact that we have a directorate specifically dedicated to communication shows that this is a concern, but despite all the work that UNICA has put in, we need to do much more. We have to show the dynamism of the sector, to improve its products and show how they are received by society. There s still a lot of prejudice, and that s why I see communication as the number one challenge. When we speak about communication I am including the government. I believe that our second priority is to evolve to have better communication relating to a program of specific actions. Another important challenge is to work with the Brazilian state, the legislature, the judiciary and the public prosecutor s office to build the strong institutions that we need to sustain the kind of progress we want. We need inclusive institutions that help promote change and renovation, rather than just doing more of the same. These are the institutions that implement the rules that impact us dayto-day and help us to overcome situations that arise when rules are not stable. Studies in the area of economic development indicate that you cannot have a sustainable movement without strong institutions that guide decision-making in an uncertain environment, such as the economic environment. So, we face the challenge of building institutions that permit a more orderly and predictable future. This is a challenge for our country, for the entire Brazilian agribusiness sector. It is essential There has to be renewal. I see our industry vigorously searching for solutions, always looking for greater productivity 26

27 A woman in a position like mine knows there is a need to execute, show what you re made of and what you have to say if we are to successfully face the day-to-day challenges, the challenges of research, of development, of involving people, of training businessmen and workers. Anyone who visits a sugar-ethanol plant today and sees the harvesting process could never imagine what it was like 10 years ago. We have to accept the changes that are underway, and as we know, change generates a distributional effect. So how do we deal with these effects? How can a greater number of people participate positively in this transformation? Our priority in facing these challenges is to communicate, communicate and communicate with the community, the government, society and international governments.

28 history natalie jorge - Thinkstock 28

29 10 Since the first flex-fuel car years was launched in Brazil in 2003, production of this type of vehicle has grown continually in the country on the road Marginal Pinheiros Expressway in São Paulo 29

30 history reproduction Model T Ford: the great-grandfather of flex-fuel cars 30 lex-fuel cars now being F driven around Brazil and the world are the great grandchildren of the Ford Model T, which was produced in the United States between 1908 and 1927 and was the first vehicle in history able to run on more than one type of fuel. This motoring legend had an adjustable injection carburetor which allowed for the use of gasoline, ethanol or a mixture of both. The mythological Henry Ford, founder of the brand name, began thinking of using ethanol as a fuel for cars even before prohibition, which reigned in the United States between 1920 and 1933 albeit with various ways of getting round it. Ford s idea was trumped by the then low cost of oil, which lasted until the crisis of the 1970s. In some ways this turned the world upside down in the fuel sector, and other sectors connected with it. The explosion of oil prices from the 1970s gave ethanol the chance to rise again, and it gradually came to occupy a significant market share. Brazil has always been a leader in this new endeavor, creating at that time the Proálcool program. Led by the government, this program innovated by giving priority to a fuel that was cleaner and produced with Brazilian technology and labor, and could substitute the much more expensive petroleum. Brazil s first flexfuel car, the VW Gol 1.6 Total Flex, was brought to market through a joint initiative by the automobile industry and ethanol producers, without government involvement

31 Brazil was to innovate once again three decades after the experiment that led to ethanol-powered cars, albeit with a very different situation in the world market, when the automobile industry launched the flex-fuel car. The first such model was Volkswagen s Gol 1.6 Total Flex. This was quickly followed by models from various other vehicle makers. Unlike what happened in the 1970s, when Proálcool was directed just by the government, the flex-fuel car was a joint initiative by the automobile industry and ethanol producers without government participation. Since then there have been many improvements, and production of flexfuel cars has grown geometrically from the 2003 launch to dominate the market today. The Brazilian flex-fuel engine works with any proportion of gasoline and ethanol, and both fuels use the same tank. Fuel injection is adjusted automatically by sensors that analyze the vehicle s exhaust emissions. The success of flex-fuel cars, and the requirement in Brazil to have between 20% and 25% of ethanol blended into gasoline, led to ethanol consumption Flex-fuel cars have prevented the emission of 190 million tonnes of CO2 since they were launched in Brazil disclosure Brazil s first pure ethanol-powered vehicle, a Fiat

32 history Growth of flex-fuel Year Total units in Brazil ,1 million million overtaking that of gasoline in 2008 just as the process by which government policy has favored gasoline started prompting a turn-around in the market. Today, even though more car owners are choosing gasoline, almost 90% of light vehicles sold in Brazil are flex-fuel. This includes many imported models, produced with flex-fuel technology in other countries to supply the Brazilian market. Today, some 60% of all the vehicles on Brazilian roads have flex-fuel technology. One difference between the ethanol sold in Brazil and the E85 blend containing 85% ethanol and 15% gasoline that is sold in the United States and some parts of Europe, particularly Sweden a kind of model market for the continent is that the hydrous ethanol sold at Brazilian pumps effectively contains no gasoline, just a 1% addition so it is not classified as drinkable. This means that Brazilian ethanol is E100. Marcelo Camargo/ABr 32 Flex-fuel cars: the advantage of using clean fuel

33 volkswagen s Archive Gol 1.6 Total Flex: the first Brazilian flex-fuel car Another difference is that hydrous ethanol contains 5% of water, for technical reasons. In the United States ethanol is effectively anhydrous, with just 0.5% of water. This is also used in Brazil, but only to blend with gasoline in a proportion of between 20% and 25%. In the rest of the world the blend level is at most 10%. This means that Brazilian flex-fuel cars can run on the ethanol sold at foreign service stations. The advantage of ethanol being a clean fuel has also helped speed up the production of flex-fuel cars in Brazil. Not long after the launch of Brazil s first flex-fuel vehicle, similar models from several other car makers were to be seen on the country s streets. In the first year some 800,000 flex-fuel vehicles were licensed in Brazil 52% of total sales of new cars that year. The flex-fuel vehicle fleet in 2012 exceeded 18 million cars. And the Carbonometer, a virtual calculator to be found on the UNICA site, shows that flex-fuel vehicles have prevented the emission of nearly 190 million tonnes of CO2 from 2003, when the Gol Total Flex was launched, through January of Today flex-fuel models account for nearly 90% of annual sales of light vehicles in Brazil. At least 60% of all the cars circulating in the country are flex-fuel. If sales hold their current pace, this percentage will rise to almost 80% by During the second half of 2013, the Brazilian automotive industry will commemorate the 20 millionth flex-fuel car built. The 20 millionth flexfuel car produced by the Brazilian auto industry is due to leave an assembly line somewhere in the country during the second half of

34 COLUMN By fernando calmon* Flex-fuel technology is here to stay One of the technologies in which Brazilian engineering has advanced most in recent times has been the system for the flexible use of ethanol and gasoline in vehicle engines. Experiments started in 1993, but it took 10 years to produce the first automobile, popularly known as flex. A decade later, the program has achieved really remarkable progress. The numbers are impressive. By next July the automobile industry will have produced 20 million flex-fuel cars and light commercial vehicles. Flex-fuel technology is available in more than 90% of the models on sale, including imported ones. Light vehicles equipped with flex-fuel engines represent nearly 60% of the total current fleet and look set to reach 80% within five years. As Brazil has become the world's fourth largest vehicle market behind China, the USA and Japan, so the interest in learning more about ethanol has spread far beyond Brazilian shores. Light flex-fuel vehicles represent almost 60% of the total fleet in circulation in Brazil and could reach 80% by

35 Brands from China, South Korea and Mexico, working in their home countries, started developing engines specifically for cars to be exported to Brazil. The total supply of vehicles with flex-fuel engines available in the Brazilian market currently stands at 173 models from 15 brands, counting domestic and imported. Through a decade of technological development these engines have proven to be reliable and robust, thanks to the expertise that Brazilian engineers acquired when developing ethanol-only engines in the late 1970s and throughout the 1980s. The challenges were considerable, in particular to keep engine performance the same with either fuel. After the first generation of flex-fuel engines, there have been three others, introducing increased compression ratios, improved electronic management systems and elimination of the need to use gasoline when starting the engine on cold days. Some myths have circulated about flex-fuel engines. However, the issues have been overcome, or proved to be nothing more than fiction. Despite the present good level of flex-fuel engine technology, some major developments are expected for the coming years. One decisive advance will be the adoption of direct fuel injection, already widely used outside Brazil for gasoline engines. In Europe, suppliers have everything ready for E85 fuel (85% anhydrous ethanol and 15% gasoline). However, questions have arisen about the adaptation to Brazilian biofuel, the pure hydrated E100. In reality, both auto parts manufacturers and car makers already have solutions in sight and new engines will probably come to market in the next two or three years. Wide range of choice: 173 models from 15 brands, available with flex-fuel engines in Brazil 35

36 COLUMN 36 The biggest improvement, however, will be combining direct injection and turbocharging. Specifically in the case of ethanol, this will represent a major leap forward, because ethanol can make better use than gasoline of these two resources. With the help of electronics, it is possible to adjust the consumption/ performance equation in such a way as to improve the current competitive relationship between the prices of the two fuels. It means that even if the biofuel costs 75% of the price of gasoline, it will still make sense to choose it when filling the tank. At present, the reference level is 70%. Initially, a flex-fuel engine with more sophisticated technology may cost somewhat more. But the tendency will be for this to fall through increases of scale and the fiscal incentives already provided for in the new automotive regime dubbed Inovar- Auto which will be force Over the past three years, a series of events has decreased the demand for green fuel. These include the international financial crisis that began in 2008, climatic factors affecting the production of sugarcane, and the imbalance between the relative prices of ethanol and gasoline all of them issues that will be discussed in depth during the Ethanol Summit However, the Brazilian Sugarcane Industry Association (UNICA), the largest organization representing the sugar and ethanol sector in Brazil, founded 1997 in São Paulo state, created an unprecedented institutional campaign directed to the final consumer and explaining the value of the fuel. Car owners have received positive and goodhumored messages starting in November of last year and continued this year in print, radio and television media. Key messages include the importance of Despite the present good level of flex-fuel engine technology, some major developments are expected for the coming years one decisive advance will be the adoption of direct fuel injection Full tank: the Brazilian flex-fuel fleet is twice the size of America s ethanol for preserving the environment and reducing the carbon dioxide emissions responsible for global warming and climate change, while improving urban air quality and increasing engine performance. The flexibility of being able to fill the same tank with either vegetable-based or fossil fuel dates back to the early 20th century, around The iconic Ford Model T, the car that popularized motoring

37 It is essential to appreciate the historical significance of Brazil s ethanol program, launched by the federal government in It was the largest alternative fuel program deployed in any country in the United States and around the world, could run on either fuel. Then the price of gasoline fell, and so the experiment was not continued. Flex-fuel technology reappeared in the U.S. in the early 1980s for methanol/gasoline, with stimulus from the U.S. government. Initially it was not full flexibility: it was not possible to mix the fuels in any proportion. The idea was to have the production of vehicles with flex-fuel engines at least partially compensate for high power, high consumption gasoline engines. Just 705 units were manufactured between 1985 and 1992 for test purposes in California and also in Canada. The series production of E85/ gasoline engines began in 1996 and today, the U.S. produces about 900,000 units a year of cars and light commercial vehicles with flex-fuel engines, while Brazil produces 3.5 million units annually. The Brazilian fleet of vehicles with flex-fuel engines is currently twice that of the U.S., although manufacturing started seven years later in Brazil. However, it is essential to appreciate the historical significance of Brazil s ethanol program, launched by the federal government in It was the largest alternative fuel program deployed in any country. The first ethanol-only car, a Fiat 147, received official certification in July of Ethanolonly engines came to represent more than 90% of cars sold in Brazil in the 1980s. Over five million units were produced by In March of 2003, the Volkswagen Gol was launched as the first car equipped with a flex-fuel engine. *Fernando Calmon is editor of the Alta Roda automotive column 37

38 high tech A fertile field Sugarcane-based biotechnology is growing fast. This means that new products and new initiatives just keep on coming. Check out some examples of this environmentally correct new trend: pictures for disclosure 38 Renewable plastic is being used commercially N ew bioplastics are reinforcing the technical qualities and environmental benefits of sugarcane. as a raw material for sustainable products in the chemical industry. This is already happening with the production of renewable plastic made from ethanol, used in flexible packaging for the food sector. Plastics using sugarcane as an input have been produced commercially since 2009 for companies with a global presence, including Coca-Cola, Heinz, TetraPak, Procter & Gamble, AT&T, and Michelin. The strength of sugarcane Brazilian sugarcane continues attracting the interest of global agribusiness giants who are looking for raw materials to go beyond sugar and ethanol. One example of this search came in January of this year, with the delivery of the first shipment of farnesene, a hydrocarbon produced from sugarcane juice. The project is the result of a partnership between Amyris of the United States and Paraiso Bioenergy, a UNICA member. Used in the manufacture of fuels, cosmetics, polymers and oils, renewable farnesene also known as Biofene is the basic input for about 3,000 products. Less emission of CO 2 into the atmosphere P lantbottle, the plastic bottle developed by Coca-Cola using sugarcane ethanol to partially replace petroleum feedstock, exhibits no change of chemical properties, color, weight or appearance when compared to conventional PET. Incorporating up to 30% of renewable plantbased material, the 100% recyclable packaging will reduce the company s dependence on nonrenewable resources and reduce CO2 emissions into the atmosphere by 20% compared with conventional plastic bottles.

39 The success of the flex-fuel motorbike L aunched in 2009 by Honda, the Mix model has sold three million units in Brazil. Five new models (1w/125, 3w/150 and 1w/300 cc engines) are in production. Another highlight is this year s launch of Yamaha s first 250 cc flex motorcycle. Flying safely on ethanol Embraer s Ipanema, the world s first aircraft certified to fly on ethanol, is part of the modernization of the Brazilian countryside. Some 400 Ipanemas are already flying around the country with very satisfactory results. Green streets I n São Paulo, 60 buses have been running on ethanol for more than two years, contributing to a significant reduction in emissions of greenhouse gas that cause climate change. The Swedish government the country of origin of Scania, which manufactures the ethanol buses is considered to be one of the most advanced in Europe in terms of replacing fossil fuels with renewables such as ethanol. A program to use ethanol in public transport has operated since 1990 in Stockholm, the capital, involving more than 600 Scania buses. Sweden has thus been one of the most important importers of sugarcane ethanol from Brazil, making it an important trading partner. High projection T he increasing production of ethanol for the chemical and pharmaceutical industries in Brazil now exceeds 1.5 billion liters per year. This demand could increase fivefold by 2015, reaching 5% of Brazilian production. The Brazilian bioplastics market shows the biggest growth within this scenario, according to a projection by UNICA s representative for North America, Letícia Phillips. To get an idea of what this expansion means, Coca-Cola will build in Araraquara, São Paulo the world s second factory capable of transforming polymers made from sugarcane ethanol into the bioplastics used in bottles of the PlantBottle type. Letícia Phillips, UNICA representative for North America 39

40 speakers A free exchange of ideas The Ethanol Summit is celebrating its fourth edition. Launched in 2007 by UNICA Brazilian Sugarcane Industry Association and held every two years, the Summit is today firmly established as one of the world s leading events for renewable energy, and in particular ethanol and products derived from sugarcane. As in previous years, leading personalities from industry, academia and various levels of government from all continents will come to the 2013 Ethanol Summit in Brazil, the country that has implemented the world s most successful project for commercial-scale substitution of a fossil fuel by a renewable one. They will participate in a series of panels and plenary sessions that expand and contribute to advancing fundamental issues in the global energy agenda. There will be four plenary sessions and five simultaneous thematic rooms: Sustainability, Technology & Mobility, Markets & Investments, the Future, and Public Policies. Here s a look at this year s speakers and moderators. 40

41 AL BRYANT Vice President of Research and Development, Boeing Brasil ADILSON LIEBESCH Commercial Director, Amyris Brasil PANEL 13 PANEL 13 ALAN BOYCE Board Member, Adecoagro ADRIANO MARTINS VILAS BOAS Global Marketing Director for Sugarcane, Syngenta PANEL 8 PANEL 6 Alexandre de Mattos Setten Logistics Director, Copersucar Adriano Pires Founding Partner, Brazilian Center for Infrastructure CBIE plenary session 1 06/27 - MORNING PANEL 11 41

42 speakers André Luis Squarize Chagas Professor, FEA/USP ALTINO VENTURA FILHO Energy Planning and Development Secretary, Mines and Energy Ministry PANEL 4 PANEL 15 ANDRE MOURA Ethanol Exports Manager, BP ALVARO TOUBES PRATA Technological Development and Innovation Secretary, Ministry of Science and Technology plenary session 4 PANEL 12 André Meloni Nassar Executive Director, Agro Ícone ANDRE FAAIJ Researcher, Utrecht University and Member of the Intergovernmental Panel on Climate Change IPCC PANEL 7 PANEL 10 42

43 January/February 2013 Issue 1 volume 7 transportation fuel proposals? Regional focus: Regional biofuels focus: in southeast biofuels in Asia Europe and Australasia ANTÔNIO HENRIQUE PINHEIRO SILVEIRA Economic Monitoring Secretary, Finance Ministry PANEL 2 Besaliel Botelho President, Bosch Brazil closing ceremony BERNARDO GRADIN President, GranBio PANEL 3 You are not gambling when you choose Biofuels International is the industry s ONLY audited magazine. Our BPA audit assures you that our circulation and readership numbers are correct. This information proves you re saying the right thing to the right people in the right place. Contact Shemin Juma on or The 5% equation How is Europe reacting to the EC s latest international Double counting Nothing but a headache? UPM Biofuels

44 speakers CARLOS EDUARDO CALMANOVICI Innovation and Technology Director, Odebrecht Agroindustrial PANEL 5 Bob Dineen CEO, Renewable Fuels Association plenary session 3 CARLOS EDUARDO CAVALCANTI Head of the Biofuels Department, BNDES BRITTA THOMSEN Member of the European Parliament opening ceremony 06/27 - MORNING PANEL 6 PANEL 7 Carlos Gutierrez Vice-President, Albright- Stonebridge Group, and former U.S. Commerce Secretary plenary session 1 06/27 - MORNING BRUNO COVAS São Paulo State Environment Secretary PANEL 14 Carlos Klink Climate Change and Environmental Quality Secretary, Ministry of the Environment opening ceremony 06/27 - MORNING 44

45 CASSIO FRANCO MOREIRA Global Leader, Standards and Certifications, WWF PANEL 9 DANIEL BACHNER Global Sugarcane Director, Syngenta PANEL 6 CESAR DI LUCA Commercial Director, Case IH PANEL 8 DARIUS MANS President, Africare PANEL 15 CLAUDIO BORGES T. GASPAR DE OLIVEIRA External Relations and Sustainability Director, Raízen PANEL 9 Dennis Hankins Senior Member, United States Diplomatic Service and U.S. Consul General in São Paulo opening ceremony 06/27 - MORNING Cristiane Pires de Azevedo Bioenergy and Sustainability Project Coordinator, 4 Corners of the World PANEL 15 PANEL 12 45

46 speakers Elizabeth Farina CEO, UNICA opening ceremony 06/27 - MORNING plenary session 3 closing ceremony Edison Lobão Minister of Mines and Energy opening ceremony 06/27 - MORNING Ethan Zindler Global Head of Policy Analysis, Bloomberg plenary session 3 EDUARDO ASSAD Researcher, Embrapa PANEL 4 FABIO VENTURELLI President, Grupo São Martinho plenary session 2 ELISIO CONTINI Head of the Centre for Studies and Training, Embrapa PANEL 15 FáTIMA CARDOSO Senior Program Manager, Solidaridád Foundation PANEL 14 46

47 FERNANDO DAMASCENO Product Development Manager, Magneti Marelli closing ceremony GERALD VINCENT Director of Environment, Health and Safety, L Oréal América Latina FRANCISCO NIGRO Professor and Researcher, Poli/USP plenary session 4 PANEL 10 closing ceremony

48 speakers HÉLCIO LAMONICA Agroindustrial Technology Specialist, CTC PANEL 1 Geraldo Alckmin Governor of São Paulo opening ceremony 06/27 - MORNING HELDER GOSLING Commercial Director, Grupo São Martinho PANEL 11 GUIDO GHISOLFI President, Mossi & Ghisolfi PANEL 3 HENRY JOSEPH JR Vice-Presidente, Anfavea closing ceremony GUIDO MANTEGA Minister of Finance closing ceremony ISMAEL PERINA Agronomist and Former President of Orplana PANEL 14 48

49 JACYR COSTA FILHO Director of the Sugarcane Division, Tereos Group PANEL 6 JOÃO GUILHERME OMETTO Vice-President, FIESP closing ceremony Jaime Finguerut Strategic Development Manager, CTC PANEL 5 JOEL VELASCO Senior Vice-President, Amyris plenary session 1 06/27 - MORNING Jean William Tenor Opening Ceremony 06/27 - MORNING JOSÉ ANÍBAL São Paulo State Energy Secretary JOÃO ALBERTO ABREU Technology and Bioenergy Director, Raízen PANEL 1 PANEL 12 49

50 speakers JULIANO ASSUNÇÃO Director, Climate Policy Initiative - CPI JOSÉ GOLDEMBERG Physicist, USP and Former Environment Minister PANEL 4 PANEL 12 closing ceremony JULIO FONTANA President, Rumo Logística PANEL 11 JOSÉ MOREIRA Researcher, National Biomass Reference Center CENBIO PANEL 1 KARLA CAMARGO Food Safety Manager for Latin America, Syngenta PANEL 15 JOSÉ ROBERTO MENDONÇA DE BARROS Managing partner, MB Associates plenary session 2 KEVIN R. WEISS CEO, Byogy Renewables PANEL 13 50

51 Settlement Thursday, May 23, 2013 Source: Chicago Board of Trade Current Yr Previous Yr Current Yr Previous Yr Current Yr Previous Yr Current Yr Previous Yr Ethanol B100 SME RBOB Unl RBOB Pre Unleaded CBOB Unl ULSD Luís Augusto Barbosa Cortez Assistant Coordinator of Special Programs, Fapesp PANEL 13 LUIZ ANTôNIO DIAS PAES General Product Manager, CTC PANEL 14 Luis Roberto Pogetti Chairman of the Board of Directors, Copersucar plenary session 2 Ethanol Summit 2013 Attendees -- Start Your FREE 3-Week Trial! Ethanol & Biodiesel Information Service Ethanol & Biodiesel Information Service Pricing, News and Analysis for Buying and Supplying Ethanol-Blended Fuel and Biodiesel With this breakthrough daily electronic service you can... Increase your profits Stay competitive Negotiate better deals Expand your knowledge Ethanol & Biodiesel Information Service All regions contributed to the week s draw, save the West Coast where stocks built almost 2.1% from week-to-week, at million bbl. The largest draw came from Gulf Coast storage, which had 162,000 bbl of ethanol disappearance over the week, or down 6.9%, with million bbl on hand. Ethanol & Gasoline Component Spot Market Prices (prices in U.S $/gal.) Methodology and Definitions: Along with a sizable and by some lights highly questionable jump in gasoline demand reported by DOE for the last week, the agency also had ethanol blending indications popping sharply higher lately. In fact, conventional gasoline mixed with ethanol at million b/d for the week is the highest ever recorded in weekly DOE figures, up 2.03% from the week before to barely nose over the previous high recorded late last June. Compared to the same time a year ago, such blending moved up 2.92%. Chicago numbers indicated healthy blending margins for ethanol. Spot values for in-tank ethanol at $2.62/gal late in the week indicated it was about 55.8cts cheaper than spot unleaded or CBOB in the market. A week ago that difference was only slightly wider, at 57.2cts. A month ago, gasoline in the Windy City held less than a 46.7cts premium to spot ethanol. Midwest prices have been particularly strong for gasoline, however, and different blending numbers might show up outside the region. In New York, for example, barge ethanol lately trading at $2.74/gal nosed 3.19cts over unleaded spot assessments, and RBOB only held about 7.8cts or so premium. That is about the same differentials reported in the Harbor market a month ago. In Key Markets Gulf Coast Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Ethanol Pricing, News and Analysis for Buying and Supplying Ethanol-Blended Fuel and Biodiesel Ethanol Futures (cts/gal contract price) U.S. Ethanol RINs U.S. Cellulosic RINs U.S. Biodiesel RINs U.S. Advanced Biofuel RINs In Each Issue... B100 SME RBOB Unl RBOB Pre CBOB Unl Unleaded ULSD June 2013 July 2013 August 2013 September ULSD CBOT Ethanol & Gasoline Component Spot Market Prices New York Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Ethanol Ethanol FWD U.S. RINs (prices in U.S. $/RIN) B100 SME RBOB Unl Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. RBOB Pre CBOB Unl CBOB Pre Unleaded ULSD Los Angeles Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Ethanol CARBOB - R CARBOB - P ULSD Nebraska (fob Railcar) Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Chicago (prices in U.S. $/gal.) Ethanol Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Ethanol Spot Price Block Term Q2-Q3 Contract Values Bulk Truck Spalsh Blend Splash Blend City, State (Bulk Barge/Rail) Fixed Formula Formula (calculated) Spot Prices (rack) Rack Price Producer Prices Albany, NY N/A N/A Houston, TX NYMEX RBOB N/A N/A Unl New Haven, CT NYMEX RBOB N/A N/A N/A Unl New York, NY NYMEX RBOB N/A N/A Unl -35 Chicago, IL NYMEX RBOB N/A N/A Unl -45 Tampa Ethanol Buying Prices Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Ethanol Dallas Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Ethanol San Francisco Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Chicago Rule 11 (prices in U.S. $/gal.) Louisville, KY N/A N/A N/A N/A N/A Ethanol N/A NYMEX Los Angeles, N/A N/A N/A N/A N/A St. Louis, MO RBOB CA (90.1) Unl -44 NYMEX RBOB AZ Minneapolis, MN Unl NYMEX San Francisco, N/A Phoenix, RBOB CA (90.1) Unl NYMEX RBOB N/A N/A Unl -30 N/A Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Current Yr Ethanol Market Overview... 1 Ethanol and Gasoline Component Spot Prices Block Term Contract Prices in Key Markets... 3 Bulk Truck Spot Prices in Key Markets... 3 Pacific Northwest Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. See page 2 for more spot pricing locations Ethanol Calif. Low Carbon Fuel Standard (Carbon Credit: $/MT; Carbon Intensity Pts: $/CI) Fri. 05/17 Mon. 05/20 Tues. 05/21 Wed. 05/22 Thurs. 05/23 Wkly. Avg. Carb Credit Pacific Northwest N/A N/A N/A N/A 306 N/A CI Pts Renewable Fuels Averages... 5 Biofuels Stock Performance... 6 Inside Washington... 7 In Key Commodity Markets... 8 Key Supply and Demand Statistics May 27, 2013 Volume 10, Issue 21 Some heavy backwardation also dissipated from ethanol markets, especially heading into the end of the month when prices tend to converge. May barge values in the Harbor that early this month ran a dime or more over June barges, by late in the week traded at only a penny premium. Chicago ethanol for June remained cheaper than May, but forward cash prices started to pick up, as well. Argo ratable ethanol in-tank for June had talks at $2.595 by $2.615/gal at midweek before bids edged up to $2.60/gal. Any-June talks reportedly converged on $2.58/gal in the latter part of the week, but without any late word of a confirmed deal. DOE: U.S. ethanol capacity virtually unchanged year to year Ethanol production capacity in the United States remained nearly unchanged from the year before by the start of 2013, the U.S. Energy Department reported recently, while the number of domestic plants also remained fairly steady. Collectively, ethanol plants in the U.S. had a nameplate capacity to produce billion gal of fuel-grade ethanol at the end of 2012 coming to an average of 903,000 b/d capacity for the year, according to DOE. The agency s calculations put capacity just slightly higher year-on-year, by 0.93% against 2011 capacity despite dropping the number of facilities able to make product by one plant, at 193 for end Actual U.S. ethanol production in 2012 ran 13.3 billion gal by DOE s count, or about 4% under the end-year capacity estimated by the agency. The latest weekly DOE figures Ethanol Truck & Spot Prices City, State Spot Prices (Rack) Rack Price Producer Prices Cleveland, OH N/A Decatur, IL N/A Des Moines, IA Doniphan, NE Fargo, ND Indianapolis, IN N/A Kansas City, KS Madison, WI Omaha, NE Peoria/Pekin, IL N/A N/A Sioux City, IA Sioux Falls, SD Topeka, KS Wichita, KS Denver, CO N/A May 27, 2013 Volume 10, Issue 21 OPIS derives ethanol, gasoline and biodiesel prices from many means, including surveying buyers and sellers via phone/ , and receiving postings electronically from producers and purchasers. While OPIS makes best efforts to ensure the accuracy and timeliness of its prices, it in no way guarantees either the accuracy or timeliness of any of the data included herein. Definitions are as follows: May 27, 2013 Volume 10, Issue 21 Ethanol Market Overview: Output overshadows shy supply Ethanol Spot Price (Bulk Barge/Rail): These are large quantity pure ethanol deals transacted or being discussed in certain FOB markets. After getting a push here and there through the week, ethanol spot prices started to sag, especially when corn gains flattened out and after the DOE reported more aggressive production. Brazil Ethanol: Undenatured anhydrous ethanol cargoes, FOB Brazil terminals for export, typically 50,000 bbl or more available 5-30 days from the date of publication. The assessment generally reflects price at the Santos export terminal, though others may be used for assessment purposes. Ethanol markets did get a big midweek boost when DOE reported that for the week ending May 17 domestic ethanol plants pumped out 875,000 b/d up 2.1% from the week before and not only reached the highest of the year, but the highest rate reported by EIA since June, some 11 months ago. Ethanol traders did not seem overly impressed with the figure until it ginned up corn trading, putting double-digit gains in CBOT futures. Block Term Contract Values: These are the three-to-six month contract deals between large buyers and sellers of pure ethanol. Some are done as fixed, and those deals are reported in the Fixed column. Other deals are done based on a differential to certain gasoline benchmarks (usually conventional spot unleaded). Those formulae are tracked and reported by market each week in the Formula column and calculated (based on the closing Thursday price of the gasoline benchmark) to arrive at a Formula Calculated price. All deals ( Fixed and Formula ) are reported from a weighted average survey. The big corn gains had ethanol spots for this week trading up to $2.67/gal at midweek, but as the gloss came of corn in the latter part of the week, it also came off ethanol with late word on in-tank trades that took May and early June gallons down to $2.62/gal. The lower ethanol prices came as CBOT corn slipped to barely positive numbers, with some presstime trading putting bushels a couple pennies in the red. Bulk Truck Spot Prices (Rack): These are the prices for truck quantities of pure ethanol at storage points in the given market. These prices are not posted they are offered to buyers given supply and demand dynamics at prices discovered and published by OPIS. Splash Blend Rack Prices: These are the average of the Thursday closing price that producers and resellers are posting at various rack locations. Typically prices are for small quantities that marketers pull to blend into gasoline to create and deliver ethanol-blended gasoline to accounts. However, the jump in output for the week still left producers running 4.79% lower compared to year-ago output. The rise in ethanol output has yet to add to the nation s storage tanks. At million b/d for the week, DOE had U.S. ethanol supply drawing 1.5% over the week and moving lower for the fourth week in a row, in which time stocks shed some 8%, sliding more than 24% behind a year ago. The RINs Price Benchmark Splash Blend Producer Prices: These are the average of the Thursday closing price that producers (not resellers) are posting at various rack locations. Typically prices are for small quantities that marketers pull to blend into gasoline to create and deliver ethanol-blended gasoline to accounts. continued on page 3 Low Carbon Fuel Standard Credits: Traded in U.S. dollars per metric ton of carbon dioxide (CO2), this represents the daily traded price range or range of bids and offers on carbon credits generated for compliance under California s Low Carbon Fuel Standard program implemented by the California Air Resources Board. Trading is for credits transferable in the current calendar year, until the last month of the year when deals for the following year may also be considered. 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52 speakers MAGDA MARIA DE REGINA CHAMBRIARD General Director, ANP LUIZ AUGUSTO HORTA NOGUEIRA Professor, Natural Resources Institute, Federal University of Itajubá PANEL 4 plenary session 1 06/27 - MORNING MARCELO ISMAEL Director Business Specialties, BASF PANEL 8 LUIZ DE MENDONÇA CEO, Odebrecht Agroindustrial plenary session 2 MARCOS FAVA NEVES Professor at USP/Ribeirão Preto PANEL 2 Luiz Moan Yabiku President of Anfavea plenary session 4 MARIÂNGELA REBUÁ General Director of the Biofuels Department, External Affairs Ministry plenary session 1 06/27 - MORNING 52

53 MARKUS RARBACH Director, Biofuels and Derivatives, Clariant PANEL 3 Meghan Sapp Secretary General, PANGEA - Partners for Euro-African Green Energy plenary session 3 MAURICIO DE MAURO Planning and Sustainability Director, Copersucar PANEL 9 MICHAEL McADAMS CEO, Advanced Biofuels Association plenary session 3 PANEL 13 MAURICIO TOLMASQUIM President, EPE PANEL 1 Michael Rinelli New Business Manager, CTC PANEL 12 MAURO BORGES LEMOS President, Brazilian Industrial Development Agency ABDI PANEL 2 53

54 speakers NICK GOODALL CEO, Bonsucro PANEL 9 MICHEL SANTOS Corporate Affairs and Sustainability, Bunge Brasil PANEL 9 ONOFRE ANDRADE Manager, Biofuels and Sustainability, Argos Energies PANEL 10 MIGUEL NORMANDO ABDALLA SAAD President, CPFL Renewables PANEL 1 OSCAR BRAUNBECK Agricultural Program Coordinator, National Bioethanol Science and Technology Lab CTBE PANEL 5 Miguel Soldatelli Rossetto President, Petrobras Biofuels plenary session 2 PEDRO PARENTE President, Bunge Brasil and Chairman of the Board, UNICA plenary session 2 54

55 PEDRO UBIRATAN ESCOREL DE AZEVEDO São Paulo State Chief Prosecutor PANEL 14 RICHARD ELMAN Chairman, Noble Group PANEL 6 PLINIO NASTARI President, Datagro Consultancy PANEL 2 ROB VIERHOUT CEO, epure plenary session 3 PANEL 7 Pratini de Moraes Former Minister of Agriculture closing ceremony ROBERTO RODRIGUES Former Minister of Agriculture RICARDO DORNELLES Director, Renewable Fuels Department, Mines and Energy Ministry PANEL 2 closing ceremony 55

56 speakers SALIM MORSY Bioenergy Analyst, Bloomberg New Energy Finance PANEL 6 ROBSON FREITAS New Technologies Director, CTC PANEL 3 SAMUEL MOREIRA President, São Paulo State Legislature closing ceremony ROGÉRIO MANSO Commercial Director, Solazyme PANEL 10 TASSO AZEVEDO Sustainability Consultant and Forestry Engineer PANEL 4 RONALDO PEREIRA Commercial Director, FMC PANEL 10 Thomas Apostolos CEO, Ricardo Inc. plenary session 4 56

57 THOMAS VIDEBAEK Executive Vice President of Business Development, Novozymes PANEL 3 WALTER COSTA Business Director Brazil, FMC PANEL 8 UWE FRITSCHE Director, International Institute for Sustainability Analysis and Strategy IINAS PANEL 7 WEBER AMARAL Researcher, ESALQ/USP PANEL 5 VASCO DIAS CEO, Raízen plenary session 2 WILLIAM BURNQUIST Business Director, Genetic Improvement, CTC PANEL 8 Wagner Bittencourt Vice-President, BNDES Opening Ceremony 06/27 - MORNING 57

58 moderators ALFRED SZWARC Emissions and Technology Consultant, UNICA PANEL 3 plenary session 4 André Meloni Nassar Executive Director, Agro Ícone PANEL 15 ANTôNIO DE PáDUA RODRIGUES Technical Director, UNICA PANEL 11 BRAD ADDINGTON Senior Market Editor, OPIS PANEL 12 58

59 EDUARDO CALDAS Project Manager, Apex-Brasil PANEL 10 EDUARDO LEÃO DE SOUSA Executive Director, UNICA PANEL 2 EDUARDO CARVALHO Consultant, Former CEO, UNICA PANEL 6 closing ceremony GERALDINE KUTAS Senior Aide to the President for International Affairs, UNICA PANEL 7 SometimeS the most valuable commodity isn t ethanol, biodiesel or biomass OuR unique MARKet INsIGHt YOuR MOst VALuABLe COMMODItY Thomson Reuters All rights reserved ReuteRs/Stephane Mahe.

60 moderators IZA BARBOSA Corporate Responsibility Manager, UNICA PANEL 14 MARCOS JANK Managing Director, Plataforma Agro and Former CEO, UNICA PANEL 5 LETíCIA PHILIPS Institional and Government Affairs, UNICA PANEL 13 PAULO SOTERO Director, Brazil Institute, Woodrow Wilson Center plenary session 1 06/27 - MORNING PANEL 4 LUCIANO RODRIGUES Economist, UNICA PANEL 8 WILLIAM waack Anchor plenaries and Ceremonies LUIZ FERNANDO AMARAL Head of Environmental Responsibility, Rabobank PANEL 9 ZILMAR DE SOUZA Bioelectricity Manager, UNICA PANEL 1 60