Production and use of fuel ethanol in Brazil - BAFF

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A4.5.
How is sugar-cane paid for in São Paulo State?
Sugar-cane can be grown either by the industrial plant itself — in owned or leased
lands or through farming companies related to the same business group — or third
parties, usually natural persons, who are referred to as sugar cane suppliers.
Sugar-cane suppliers always sell their production to the processing plants located
near their rural property because of two factors: 1. Sugar-cane quality deteriorates
if it takes too long to deliver it (refer to question 4.1); and 2. Excessive long-haul
transportation costs. Such fact winds up limiting the number of plants which whom
suppliers can negotiate their production.
In order to prevent an unbalance in that relationship, a joint work conducted by
the association that represents São Paulo-based sugar-cane suppliers (Orplana
— Organization of Sugar-cane Growers of Brazil’s Center-South Region) and the
association that represents São Paulo-based sugar and ethanol industries (Unica
— Sugar-Cane Industry’s Union) created a system in 1999, for free adoption, that
aims to set parameters for a fair, appropriate remuneration of producers.
By the name of CONSECANA, the system goes by the principle of apportioning
the net income —net of taxes— from sugar and ethanol sales among sugar-cane
suppliers and the industry. To that end, it uses:
1. a technical method to assess the quality of the sugar-cane delivered by the
supplier, in terms of the amount of sugars usable in the industrial process
that it contains;
2. the means farming and industrial processing costs;
3. the price for the end products, i.e. sugar and ethanol, either for the
domestic market or exports, asked in the course of the crop year (May
through April of the next year);
4. the characteristics of each industrial plant’s production and marketing
activity for the crop year; these characteristics consist of the amount
produced of each product (sugar and ethanol) and the end use after sale
(use as fuel, export, etc.).
A. Fuel ethanol: Activities in Brazil and the world context