Brazil govt, millers set for ethanol price talks


SAO PAULO, Brazil, Feb 17 (Reuters) - The Brazilian government is likely to seek talks with ethanol producers on ways to contain escalating prices, an agriculture ministry official said on Friday.

Ethanol prices rose this week above the 1.05 reais per liter price cap agreed by producers and the government in January, according to the Center for Advanced Studies in Applied Economy (Cepea/Esalq).

Prices have soared due to strong demand from flex-fuel motorists seeking cheaper fuel after world oil prices climbed to record levels.

"The government will at the very least call a new meeting with the sector to consider what measures could be taken," said the official, who declined to be identified.

The Sao Paulo Cane Agroindustry Union (Unica) said that the breaking of the price cap reflected enormous market pressure.

"These prices reflect current supply and demand and rising world market prices which prompted ethanol producers and distributors to anticipate business so as to maintain market share," Unica said in a statement.

Unica added that the January agreement succeeded in holding prices below the 1.05 reais per liter price cap for 40 days.

Brazil is the world's biggest sugar and ethanol producer and exporter, although the United States is close to capturing the No. 1 slot in ethanol.

U.S. President George W. Bush recently called on the United States to speed up production of ethanol and other alternative sources of energy to reduce dependence on costly oil imports.



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