Feasibility of Ethanol Futures Markets in the Bm&F-Bovespa Stock Exchange

Case Studies

Abstract

This paper analyzes favorable factors and impediments to the use of futures contracts for ethanol in the BM&F-Bovespa Stock Exchange by agents of ethanol-producing firms. The theoretical framework is rooted on traditional criteria of the theory of success and failure of futures markets analyzed by empirical research into commodities in Brazil. The method is based on the analysis of multiple case studies collected through questionnaires sent to trader agents of ethanol-producing firms. The results suggest that the main obstacles to create liquidity in futures contracts for ethanol in Brazil lie in the: i) concentration of the distribution market; ii) competition with controlled gasoline prices; iii) the downstream verticallization on the part of some major players; iv) possibility of earning higher profits between seasons or through consolidated trading pools, and; v) inappropriateness of the contract design.