Brazilian ethanol imports in July were up 34% on the year, but down 63% on the month to 73.8 million liters, data from the Secretariat of Foreign Trade (SECEX) showed Monday.
Almost all of the volume entered in the country through the ports in the northeast region and was product originating from the US to be used as fuel blended into gasoline.
Brazil mandates a 27% ethanol mix with gasoline.
Imports have risen since last year to fill a wide gap left by a sharp drop in the domestic production.
Producers have diverted more cane to produce sugar at the expense of ethanol because of high international sugar prices.
A drop in the imports in July was expected as the production Center-South is now in full swing and it has reduced the necessity of foreign ethanol to supply the domestic market.
Even though there is a chance of a 17% import tax return still this year, further imports are expected to continue amid the tightness in supply.
The 20% import tariff was levied until 2019 due to a shortage in the domestic market.
Amid surging imports throughout 2016 and early 2017, sugarcane industry UNICA and producers in the North-Northeast are asking for the return of the tax.
The majority of ethanol imports enters through the North-Northeast region and they argue the imported ethanol has put pressure on local prices.
A vote in foreign trade board Camex to reinstate the tax is scheduled for late August.
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Brazil's agricultural sector has opposed the tariff, with the farmers group Brazilian Rural Society arguing it could lead to retaliatory tariffs from the US on other commodities.
In May amid the surge, the country established a new rule for ethanol importers, which was proposed by the National Council for Energy Policy in mid-April. The rule states that importers of ethanol have to follow the same rules as national producers of keeping stocks of anhydrous of 25% in January of each year and 8% in March, based on previous-year sales.
Imports in the third quarter of the year are expected to drop, when compared with Q1 and Q2, which reached 721 million liters and 559.4 million liters, respectively.
Kingsman, an agricultural unit of S&P Global Platts, expects imports in Q3 to total roughly 150 million liters, but expects a rise again in Q4 when imports should reach 640 million liters.
In November-December, the sugarcane crush in Center-South starts to slow down, until the region enters in the intercrop period until end-March.
Imports in 2017 are expected to reach over 2 billion liters, up from 834 million liters in 2016, according to Kingsman.
