Abstract
AbstractThis chapter first discusses the sugar market in Brazil in terms of: raw and refined sugar; anhydrous and hydrous alcohol; government policies toward sugarcane and the products made from it; and sugar and ethanol prices in Brazil and in the world market. To investigate the potential effects of increasing the alcohol/gasoline blend ratio from 20 to 26%, the next section develops a conceptual model that considers the Brazilian sugarcane market in the context of sugarcane production and prices, refined sugar production and prices, ethanol production and prices, and world market effects. The conceptual model also makes it possible to identify welfare measures for Brazilian and world consumers and producers of sugarcane-based products. Next, an empirical model, based on several measures of supply and demand sensitivities to prices and government policies, is simulated. Ranges for the effects of the increased blend ratio on prices, quantities and welfare are calculated.
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