OVERVIEW & OUTLOOK:BRAZILIAN SUGARCANE INDUSTRY by Leticia Phillips, Representative in North America for the Brazilian Sugarcane Industry Association - UNICA. Presentation featured at the 2nd International Conference: Brazil: A pathway into the future from the Emerging Markets Institute at Cornell University's Samuel Curtis Johnson Graduate School of Management and Better Brazil

1. OVERVIEW & OUTLOOK:
BRAZILIAN SUGARCANE INDUSTRY
Leticia Phillips
Representative, North America
Washington,
September 20, 2012

2. ABOUT UNICA
• UNICA is the leading sugarcane
industry association, representing +130
producers and mills in Brazil
• Responsible for 50% of all ethanol and
60% of all sugar production in Brazil
• Emerging as a leader in the generation
of bioelectricity already meeting 2% of
Brazil’s electricity demand
• International presence, now in
Washington & Brussels, to engage in
constructive dialogue

3. KEY NUMBERS - BRAZILIAN SUGARCANE SECTOR
 Number of mills: 413
 Sugarcane growers: 70,000
 Direct employment: 1.18 million
 Sector annual revenue: US$ 28 billion
 Foreign Revenue (Exports): US$ 16.2 billion
 % Energy Matrix: 16% - 2nd source (behind oil)
and 1st source of renewable energy
1st SUGAR PRODUCER IN THE WORLD
 25% of world production
 50% of world exports
2nd ETHANOL PRODUCER IN THE WORLD
 20% of world production
 20% of world exports
Fonte: LMC, F.O.Licht’s, Secex, UNICA e Rais.

4. BRAZILIAN ENERGY MATRIX INPUT
47.3% 45.5% 44.1%
Other
Coal and Renewables Uranium 52.7% 54.5% 55.9%
Derivatives 4.1%
1.5%
5.6%
Natural Gas Petroleum 2009 2010 2011
10.1% and Non-renewable Renewable
Wood and Derivatives
Other 38.6%
Biomass
9.7% Sugarcane
15.7% WORLD (%)
Hydro 12.9 7.6
14.7%
92.4
87.1
#1 Source of Renewable Energy in BR World (2008) OCDE (2009)
Non-renewable Renewable
Sources: Balanço Energético Nacional BEN (2011) and International Energy Agency. Key World Statistics 2010. Elaboration: UNICA

5. LAND USE IN BRAZIL
Million Ha*
Total Area Native Vegetation Land in Actual Use Other Uses
851 554 260 38
100% 65% 30% 5%
Conservation Permanent Other Native
Units and ILs Protected Areas Vegetation
204 135 214
Pastures Crop Land
24% 16% 25%
198 60 Sugarcane
23%
Sugarcane
7% 9.5
FOR ETHANOL
1%
4.6
0.5%
Ethanol Productivity
16.000
12.000
8.000
4.000
Source: ICONE, Gerd Sparovek, IBGE, MMA, INPE/TerraClass, Embrapa, PAM2010.
0
Elaboration: Cosan and UNICA.
70´s Today Future
Note: ILs = Indigenous Lands. Other Native Vegetation include Legal Reserves (RLs)

6. RAPID GROWTH OF THE FLEX FUEL FLEET IN BRAZIL
Light Vehicles (Otto Cycle) – Million of
Motorcycles– – Million of units
units
60 30
81%* 61%**
50 25
70%*
40 20
51%* 11%**
30 15
20 10
10 5
- 0
2008
2017
2003
2004
2005
2006
2007
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2011
2014
2017
2005
2006
2007
2008
2009
2010
2012
2013
2015
2016
2018
2019
2020
Brazil will need to double the supply of fuel (ethanol e gasoline) in order
to attend the demand in 2020
Fonte: UNICA. Nota: *frota de veículos flex fuel sobre frota total ciclo Otto.

7. BIOELECTRICITY: EXPORTS TO THE GRID (MW)
2.4% NATIONAL COMSUMPTION:
 almost 6 milion homes/year
 2,6 million tCO2 avoided
 5% savings of reservoirs during dry 20%
months
Fonte: UNICA e MME (2011).
*Previsão
50%
33%
37%
156%

8. PROJECTIONS FOR SUGAR
PRODUCTION - MT
15,7 MT
13.7 In order to supply the internal
12.2 market and keep 50%
11.0 participation in the world
market, Brazil needs to increase
37.4
32.6
24.3 its production in 15,7 MT of
sugar
2011/12 2015/16 2020/21
EXPORTAÇÂO CONSUMO DOMÉSTICO
Fonte: FO.Licht, LMC, Secex e estimativa UNICA. Nota: o volume de açúcar consumido no mercado doméstico Inclui o açúcar contido nos produtos
industrializados destinados à exportação.

9. SUGARCANE PRODUCTS: STEP BY STEP Drop-in fuels
(diesel, jet
Current Sugar fuel, gasoline)
technology
Technology under Cane juice
development (Sucrose)
Detergents &
solvents
3° generation
Cane stalks
Ethanol
Cosmetics
Sugarcane
Bagasse
(Cellulose) Lubricants
Biopolymers
(bioplastics, isopr
ene, etc)
Flavors and
Fragrances
Straw
(Tops and Leaves)
Bioelectricity
(Cellulose)
Food

10. U.S. RENEWABLE FUELS STANDARD (RFS-2)
40
35 Sugarcane Ethanol is L
O
Advanced
W
30 Renewable Fuel with E
61% GHG Reduction
Billions of Gallons
R
25
G
20 H
G
15
10
5
0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Celulosic Advanced 0.10 0.25 0.50 1.00 1.75 3.00 4.25 5.50 7.00 8.50 10.50 13.50 16.00
Biomass-based Diesel 0.50 0.65 0.80 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Non-celulosic Advanced 0.10 0.20 0.30 0.50 0.75 1.00 1.50 2.00 2.50 3.00 3.50 3.50 3.50 4.00
Conventional Biofuels 10.50 12.00 12.60 13.20 13.80 14.40 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00
Source: EISA of 2008, U.S. Environmental Protection Agency (RFS-2) Final Rule.

11. SUGARCANE DEMAND SCENARIO
To supply 50% of the country’s automotive fleet with ethanol (anhydrous+hydrous)
and maintain Brazil’s current share in world sugar market (~50%):
1,400
1,2
Billion tons
1,200  Increasing production
Sugarcane Production in (MT)
1,000 886 depends on the ability
Million tons
800 to restore
555
600 Million tons competitiveness for
400 hydrous ethanol in the
200 450 domestic market
340
140
0
2011/12 2015/16 2020/21
Sugar Anhydrous Ethanol Hydrous Ethanol
Source: UNICA. Note: the hydrous ethanol is pure sold at the pumps and used without modification by the flex-fuel
vehicles, then it competes directly with gasoline by the preference of consumers (this product is 4.9% water), the anhydrous
ethanol is blended with gasoline in proportions ranging from 18% to 25% (the anhydrous ethanol has a lower water content -

12. NATIONAL SUGARCANE CRUSHING
SUGAR AND ETHANOL: HISTORICAL OVERVIEW
45
Overview of 700
40 Proalcool program FFV
the last decade
600
1st phase: strong Automakers
35
government decision
Sugarcane (million tons)
500
Ethanol (billion liters)
Sugar (million tons)
30 intervention; pure
25 ethanol vehicles & 400
distribution
20 300
15
200
10
100
5
0 0
75/76
77/78
79/80
81/82
83/84
85/86
87/88
89/90
91/92
93/94
95/96
97/98
11/12*
99/00
01/02
03/04
05/06
07/08
09/10
Sugarcane Sugar Ethanol
Source: UNICA and MAPA. Note: 11/12* - estimated data.

13. DECADE OVERVIEW
1. World financial crisis vehicles in 2003
 Launch of flex fuel acquisitions involving affected companies
 Global interest in ethanol
2. Weather problems in three consecutive harvests Stagnation
Ethanol: 10.5% a.a.
700 Loss of domestic competitiveness for ethanol compared to gasoline
3.
Sugar: 8.9% a.a.
600 560 MT
Million tons
500
400
300
200
100
-
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2011/12**
2010/11*
Sugar Ethanol - exports Ethanol - domestic use
Sourcee: UNICA and Ministry of Agriculture,Livestock and Supply. Nota: 11/12 – estimate

14. STRONG CONSOLIDATION
Moema
Group
 Higher concentration increases competitiveness
(economies of scale and scope)
 Despite recent M&A, the industry remains fragmented

15. ETHANOL X GASOLINE
Consumer prices in Brazil - hydrous ethanol x gasoline “C”
Gasoline C
3.0 at the pump
2.5
Ethanol
at the pump
2.0
R$/liter
70% parity
1.5 Ethanol price
at the mill
1.0 Cost of
production
0.5
2006 2007 2008 2009 2010 2011
There are no clear rules to set pump prices for gasoline.
Uncertainty drives away investments to expand ethanol production.
Source: ANP. Elaboration: UNICA.

16. OVERCOMING THE CHALLENGES AND SEIZING THE
OPPORTUNITIES
Sector policies needs to be driven by a competitiveness-oriented agenda:
• Ensuring predictability, legal stability;
• Fomenting construction of greenfields and co-generation;
• Investing in innovation and technology.
Restore the competitiveness of hydrous ethanol
• Gasoline long term price-fixing
• Changes to the tax structure (ICMS, Pis/Cofins, CIDE)
• Reduction of sugarcane production costs
Demand is solid
• FFV use of ethanol can increase
• New Products and new use
• Global demand in expansion
• Increase in sugar exports
•Supply Growth
• Limited in the short term (productivity increase and marginal investments)
•Need for significant investment to build new mills
• Need for public policies that recognize the positive externalities of ethanol and ensure its
competitiveness

17. Thank you
www.unica.com.br/en
A LOW www.sugarcane.org
CARBON, ADVANCED
RENEWABLE FUEL