Brazil has exported 22.3 million litres to the US since mid-April, compared to 376.2 million litres during the same time last year, according to the Brazilian sugar cane industry association, UNICA.

”At this time last year, better US sales opportunities existed because gasoline and petroleum were so expensive,” says Julio Borges of the Brazilian consultancy Job Economia e Planejamento. ”The mixture of ethanol in gasoline in the US was very economically attractive- today the situation is very different—petroleum is cheap, gasoline is cheap.”

Bob Starkey, vice president at Jim Jordan & Associates, a US consultancy, says it is not just the price of gas: ”The weak ethanol price in the US is due to the slow demand for gasoline, demand is down for transportation fuel by 5.5% versus last year for the first six months, because of the recession and 9.5% or higher unemployment. The economics for blending ethanol is good, but overall demand for fuels is down.”

Miguel Biegai, a sugarcane specialist at Safras & Mercado, a Brazilian consultancy, blames the drop off on a lack of early contracts, usually signed some six months before the beginning of the harvest.

He notes that in late 2007, with oil prices on their way up, contracts for the following harvest were a hot commodity.But in the second half of 2008, contracts were few and far between.

”Even those who knew they would buy were afraid of buying ahead of time because they didn’t know” where prices would be in the middle of 2009, says Biegai.

The market today is improving, says Biegai, and Starkey and commercial analyst Fred Gomes of the Brazilian consultancy MBF Agribusiness say strong domestic demand has drawn interest away from imports while the US dollar has been weak compared to the Brazilian real, leading producers to get a better value locally.

Exports via the Caribbean Basin Initiative, which end up in the US but without the $0.54 per gallon tax that is charged on direct shipments, were the same as last year.

Starkey says ” Using the Caribbean dehydrators to avoids the duty is just barely profitable, but the transit time delay about four weeks make shipping to the US are risky, the price might drop between shipment and delivery date. This makes setting a contract difficult.”

European exports have held steady, and UNICA says that exports to India, Japan and South Korea have made up for the steep drop off in US exports.

Overall, Brazil exported 985 million litres in the first three months of the harvest compared with 1.1 billion litres during the same period last year.