Feb 5 Argentine said on Friday it was increasing the required blend of ethanol in gasoline to 12 percent from the current 10 percent, a change that will boost the South American country's production of the biofuel by 20 percent.

The additional ethanol would be exclusively derived from sugar, President Mauricio Macri said at a news conference in Tucuman, Argentina's main-sugar producing region.

The increase should be a boon to farmers there struggling with a slump in global sugar prices since 2010 due to oversupply.

"This announcement that the blend of ethanol in gasoline will rise to 12 percent from 10 percent guarantees the growth of the region," Macri.

Argentina, an agricultural powerhouse, produces all the ethanol it uses.

Ethanol production is about 800,000 cubic meters, of which 59 percent is corn-based and 41 percent is cane-based, said the head of the Argentine Biofuels Association, Claudio Molina.

"This will mean some 160,000 cubic meters more of ethanol are needed, at a moment when sugar prices are very low," Molina said. "So this is a very positive outcome for the whole sugarcane value chain."

Molina specified the ethanol would be produced in Argentina and said the measure would likely become effective from March or April. The ultimate aim was to raise the required blend of ethanol in gasoline to 15 percent, he said.

Argentina first demanded ethanol be mixed with gasoline at a 5 percent ratio in 2010. (Additional reporting and writing by Sarah Marsh; Editing by G Crosse and Leslie Adler)