Brazil's booming ethanol industry has won international acclaim, but recent supply and pricing problems suggest that it's not the grand solution to tight oil supplies and ever-rising prices that had been hoped, according to Knight Ridder Newspapers. Brazilian ethanol producers are struggling to keep up with domestic demand for ethanol, which is projected to grow by 50% over the next five years. Yet a 15% jump in prices earlier this year sparked a sharp drop in consumption. Even so, suppliers are struggling to plant enough fields of new sugar cane, from which ethanol is produced here, to keep up with the anticipated growth in demand. Some energy experts say this has revealed the limits of Brazil's ethanol programme and that it is an unreliable energy source, one that can't be depended on to make much of a dent in worldwide use of fossil fuels. Brazil's problems this year started after growers of sugarcane upped sugar production rather than ethanol to take advantage of rising world prices for the sweetener. Rising consumption of ethanol had already stretched supplies thin. Prices recently have fallen, but only after the government lowered the required percentage of ethanol mixed with gasoline from 25% to 20%, reducing demand. This month's beginning of the sugarcane harvest also boosted ethanol supplies and lowered prices. "This showed ethanol can help but it cannot replace fossil fuels, at least right now," said Jed Bailey, Latin American director of Cambridge Energy Research Associates, a US consulting firm. "There's a lot more development that's needed." Government and industry leaders in Brazil, already the world's largest producer of both sugar and ethanol, say they can satisfy growing demand for ethanol by producing more sugarcane. "There is a lot of room to grow more sugar cane," said Fernando Moreira Ribeiro, secretary general of the country's largest sugar and ethanol group. But with more than 13 million acres already growing sugar cane, such words worry environmentalists, who fear expansion will come at the cost of rainforests and savannah in Brazil's northern states, where there is little sugar production. Sugarcane production expanded by only 2% last year in the country's southern and central states, where most sugar is grown.
EU to rely “significantly more” on biofuel imports than thought
The European Union may import "significantly more" biofuels than originally thought under a proposal to add them to transport fuel, an EU official said Wednesday, as import tariffs won't be high enough to dissuade the world's main exporters, according to Dow Jones. The Commission in its proposal assumed biofuel tariffs would keep imports at or below 20% of the continent's biofuels consumption. But recent analyses by the European Commission's agriculture experts indicate the EU's tariffs won't be high enough to prevent more cheap ethanol imports, mainly from Brazil, said Andreas Pilzecker, an official at the agriculture department of the European Commission.>BR?>BR? "The (EU) agriculture directorate is assuming that the 20% figure is too cautious, and that actual imports could be significantly higher," Pilzecker said, speaking at a meeting Wednesday at the European Economic and Social Committee. But domestic producers would still provide the lion's share of the continent's ethanol, Pilzecker said.
Brazil's ethanol industry cried foul on Wednesday after the government lowered a fuel tax on gasoline to limit the impact of a price rise at the refinery on consumers, according to Reuters. The government's move shattered the industry's hopes of improving its margins with the widely expected 10% hike in domestic gasoline prices that came from the state-run oil company Petrobras earlier on Wednesday Ethanol prices stay at or below 70% of the price of gasoline due to the lower mileage a litre of ethanol gets compared with gasoline, but gasoline prices have been held artificially low by the government which controls Petrobras. The last time Petrobras raised prices was in 2005 when oil was at US$60-US$65 a barrel. It is now nearly double that. "The government preferred to lose millions of reais in revenues from the Cide fuel tax to not expand the ethanol market," Antonio de Padua Rodrigues, the technical director of the Brazilian Cane Industry Association, said expressing the bitterness in the sector. Ethanol prices are about 25% below what they were a year ago, due to the increase in production from heavy investment over the past few years, and in many regions have fallen to or below production costs, producers said.
INDIA: UP to allow production of ethanol directly from cane
A Cabinet meeting in Uttar Pradesh has decided sugar mills can now produce ethanol directly from sugarcane juice, according to The Hindu newspaper. According to an official statement here, apart from saving valuable foreign exchange, the Cabinet decision would enable the loss-making sugar mills to improve their financial position. Cane growers would get remunerative price for their produce, simultaneously enabling the sugar mills to tide over the problem of cane price arrears. The UP government's move assumes significance in view of the national government's recent decision to permit mixing of 10% ethanol with petrol for producing gasohol. The new system would become effective from October 1, 2008. As of now, 5% ethanol is blended with petrol. To reduce dependence on petroleum products, the national government in 2001/02 launched a pilot project in UP and Maharashtra blending 5% ethanol with petrol In addition to the ethanol produced by the state's sugar mills, around 25 distilleries have been given the licence to produce ethanol. According to the Excise Department's budget estimates for 2008/09, the total production capacity in UP of ethanol/absolute alcohol is around 607.9 million litres.
The world is awash in sugar and Brazil is no exception. With a massive 2008/09 crop currently being harvested, demand for physical sugar is almost nil this week, according to Dow Jones. "There is plenty of sugar, but no ships wanting to carry it out," said Eduardo Naufal, a broker at Union Corretora in Sao Paulo. "Freight costs are not very attractive and many buyers already have plenty of sugar already," Naufal said. The spot market for Brazilian sugar had no bidders at all Wednesday and this week saw some traders bidding 12 points over the July sugar contract on the ICE for July through September deliveries but no producers willing to sell raw sugar at those levels, at least out of the Santos port, said a broker at Terra Futuros. "There is just no significant demand for sugar in the physical market and that to me means lower prices are coming," said a broker for Hencorp Commcor. "I was bullish a month ago because of high oil prices, but with this big crop coming there will be plenty of sugar and ethanol in Brazil this year," he said. Sugar prices have been rising with oil prices mostly because of the ethanol component in sugarcane production.
The House of Commons is expected to give the green light in coming days to legislation that could boost Canadian production of ethanol, according to the Ottawa Citizen newspaper. Bill C-33 would allow the government to regulate new minimum requirements to ensure all gasoline has an average renewable fuel content of 5% by 2010 and that diesel and heating oil have an average renewable fuel content of 2% by 2012. "We have energy security and we have the environment and they're both important priorities," said Environment Minister John Baird in an interview. "We obviously cannot continue to depend on foreign oil (when) you look at the prices." The Conservatives and the Liberals pledged to introduce the 5% renewable fuel target in their campaign platforms from 2005 as part of their proposed environmental policies. Liberal leader Stéphane Dion even went further last year, calling for a 10% target by 2010. According to the legislation, renewable fuels are made from renewable resources such as agricultural crops and other organic matter, including ethanol from grains, biodiesel made from vegetable oils and animal fats or next-generation renewable fuels made from such waste products as wheat straw or forest biomass. The legislation also includes provisions for a review of impacts and new information within a year, and subsequent reviews every two years. Liberal environment critic David McGuinty said he is open to reviewing the policies on a regular basis, but he disagrees with critics who believe ethanol production is causing a global food crisis. "It's overly simplistic to draw a causal connection directly between the production of biofuels, chiefly ethanol, and food shortages. There are a number of factors at play here," McGuinty said. "This notion that Canadian ethanol production is leading to world starvation and food shortages, I just think it's leftist rhetoric and not productive."
US: Congress pushes bill to repeal ethanol incentives
Wisconsin Congressman Jim Sensenbrenner has signed on as a co-sponsor of a bill that would repeal incentives for producing ethanol, according to Wisconsin’s WEAU TV station. The bill introduced by Republican Congressman Jeff Flake of Arizona would repeal the tax credits for ethanol producers, among other moves. Sensenbrenner, who's also a Republican, says he's always opposed reformulated gasoline that includes ethanol. Backers of ethanol say it cuts air pollution and reduces reliance on foreign oil. But Sensenbrenner says gas with ethanol is less efficient, giving consumers fewer miles per gallon, and it adds costs because it's made from maize that is converted to ethanol and then has to be transported. With the rising reliance on ethanol for fuel, he says the increasing cost of maize means higher costs for animal feed and food, hitting families hard.
General Motors Corp. said Thursday it had taken an undisclosed stake in a next-generation ethanol company, its second investment in firms working on technology to make alternative fuels from sources other than maize, according to the Detroit Free Press. Mascoma, a Boston-based company, has been developing a process using bacteria and yeast to break down plant matter into ethanol in a single step, a system the company thinks could produce cheap fuels by 2010. Mascoma plans to have a small test plant in New York running by the end of the year, and has plans for another test plant in Michigan that would use wood chips to make ethanol. Mascoma executives say their process should be able to produce ethanol using less water and energy than maize-based ethanol. In addition to its New York plant, Mascoma won part of a grant worth up to US$26 million from the US Department of Energy to build another trial plant in Tennessee.
A Ghanaian company has announced it will start exporting ethanol to Sweden by end 2010, according to Thomson Financial. In Ghana's first industrial-scale biofuels project, Northern Sugar Resources Ltd. will grow sugarcane on 30,000 hectares of currently unused land in the centre of the country and turn it into ethanol in a plant that will be built by Constran SA of Brazil, executives of the two companies said. “Subject to the financial agreements being signed in June, the initial plan is for us to be exporting at half capacity -- that is 75,000 cubic metres -- in the second half of 2010,” Roger G. Walters, technical director of Northern Sugar's parent Regency Resources told AFP. Svensk Etanolkemi AB (SEKAB), a Swedish green fuels company, has committed to buying the first 10 years of the plant's production, Managing Director Anders Fredriksson told AFP in a telephone interview from Sekab's headquarters in Ornskoldsvik. The project requires a total investment of US$306 million, according to Fabio Pavan, business development director of Constran S/A. One year of production from Ghana, once the plant is running at full capacity, will cut Sweden's ethanol deficit by almost one third, Pavan said And after one year of production, ethanol should rank fourth amongst Ghana's exports, behind coffee, gold and timber, he added.
EU: Three Brazilian legislators to discuss biofuel
Three Brazilian legislators from both houses of congress will head to Brussels Tuesday to discuss ethanol with the European Energy Commission, according to Dow Jones. The visit comes on the heels of a similar exchange that ended this week, when a dozen members of the European Parliament's agricultural commission met with Brazil's rural congressional leaders mainly to discuss beef exports. This time the issue is ethanol, with many in Europe charging that ethanol is causing food prices to rise and in Brazil's specific case, being produced and expanded at the expense of tropical forest lands. Congressional leaders like Joao Tenorio of Alagoas state, a small sugarcane producer in the northern Amazon biome, claim that allegations that ethanol are causing food prices to rise are coming from the oil industry in Europe and the US. They say it is another way to fend off competitive Brazilian agribusiness in European markets. European policy makers recently said they would require environmental certification of proof that Brazilian ethanol wasn't being produced on recently deforested land before it could be purchased by European traders. "We are going to show that the cultivated area for sugarcane is growing on old pastureland," Sao Paulo Congressman Antonio Thame told Estado.
EGYPT: Savola plans to boost sugar production by more than 50%
Savola Group plans to increase its annual sugar refining capacity in Egypt by more than half to 1.15 million metric tonnes within two years to fill a gap in local production, according to Reuters. Savola plans to build a 200,000 tonnes per year sugar refinery in Egypt that will process only sugar beets at a total cost of about US$150 million, Saudi Arabia's largest food product company by market value said in a statement. It also plans to raise to 950,000 tonnes per year from 750,000 the annual production capacity of its sugar refinery located in the Egyptian town of Ain Sokhna, it added. The Ain Sokhna plant, which was built at a total cost of around US$187 million, will start commercial operations on Sunday, it added. Both projects are expected to start production within two years after the start of construction, it said, noting that works for the new sugar beet refinery will start immediately while the Ain Sokhna output increase was under study. "Right now, there is a (sugar production) gap in the Egyptian market estimated at more than 1.2 million tonnes," the statement quoted Savola's CEO Sami Baroum as saying. It would also raise Savola's total sugar production capacity to 3 million tonnes per year. Savola said it would hold a 60% stake in the new sugarbeet refinery, but did not provide more details on the ownership of the remainder.
US: Obama says rethink may be needed on maize ethanol
Democrat Barack Obama said Sunday the federal government might need to rethink its support for maize ethanol because of rising food prices, a stance similar to Republican John McCain's but at odds with farm states considered important to the November election, according to the Associated Press. “What I've said is my top priority is making sure people are able to get enough to eat. If it turns out we need to make changes in our ethanol policy to help people get something to eat, that has got to be the step we take," said Obama, D-Ill., on NBC's "Meet the Press." "We have rising food prices around the United States. In other countries, we're seeing riots because of the lack of food supply, so this is something we're going to have to deal with," he said. Last week, a group of Republican senators including McCain, R-Ariz., asked the Environmental Protection Agency to loosen congressional mandates to blend more ethanol and other renewable fuels into the gasoline supply, saying they are adding significantly to food costs. The mandates are backed by President Bush and senators representing farm states. Sen. Hillary Rodham Clinton, D-N.Y., speaking on ABC's "This Week," agreed the issue needs closer review. "What we need to do is accelerate the research into farm waste and into other cellulosic plant materials. Because, I think, instead of using the corn, let's figure out if we can use the corn cob," she said. "Let's figure out if we can use the corn stalk. Let's figure out what other kind of food, you know, waste we can use." Clinton added: "In the short run, we've got to work with our farmers and with like-minded people around the world to figure out how this increasing use in biofuels, which is part of our answer to our dependence on foreign oil, does not undermine food production and really accelerate the prices."
ISRAEL: Paz may build biofuel plant on unused land
Paz Oil Co., Israel's second-largest energy company, may build petrochemical, biofuel and desalination plants on the unused land at a petroleum refinery, according to Bloomberg. No other details were provided.
Scientists have received a grant of $94,000 to conduct a regional study to produce bio-fuel out of cassava, according to Uganda’s New Vision newspaper. The project will target extracting bioethanol for industrial use, as well as producing more nutritious and higher yielding cassava varieties. It is being executed by the National Crops Resources Research Institute, in collaboration with the Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA). “The project will concentrate on producing cassava varieties for bioethanol and for nutritional use in high quantity,” said Dr. Yona Baguma, molecular biologist at the Namulonge-based Institute. “Bioethanol will combine starch and alcohol, while nutrition will focus on protein, vitamin C and starch.” The two-year project starts this month and aims at developing human and infrastructural capacity to improve cassava through biotechnology, including tissue culture. “Cassava was introduced in Uganda in the 1850s. We are the third largest producer in the region with a total production of 5 million tonnees,” said Dr. Charles Mugoya, ASARECA’s programme manager. Baguma noted that cassava’s ability to grow under marginal conditions had made it a popular crop among poor farmers. “Cassava is the second most important staple food crop and a major source of income.” But diseases and pests have caused a dramatic reduction of cassava harvests in recent years, cutting yields to less than half their potential.
ZIMBABWE: Tongaat Hulett to boost sugar production 42%
Tongaat Hulett Limited this year intends to increase sugar production at its Zimbabwe plant by 42%, according to Zimbabwe’s Herald newspaper. In its latest results for the year ended December 31, 2007, the company said the focus for its Zimbabwean operations at Triangle Sugar Corporation Limited and Hippo Valley Estates was on building full capacity utilisation of 600,000 tonnes per annum, through increased supplies of cane from outgrowers. During the period under review, sugar production was 349,000 tonnes, including 156,000 tonnes from Hippo Valley. Triangle produced 240,000 tonnes in 2006. Total sugar production for the whole group in 2007 was 1.119 million tonnes, after the acquisition of Hippo Valley Estates. Prior to the acquisition, the group’s total production for 2006 stood at 1,067 million tonnes. The local pricing of sugar has been a contentious issue with producers saying the prices are the cheapest in the region and are not in sync with production costs. Producers have argued that they are getting a raw deal as profit due to them was being transferred to the informal sector through price distortions. A 2kg packet of sugar costs Z$8 million at the official price and Z$15 million on the informal market.
UGANDA: MPs push government against cane in Mabira forest
The campaign to halt the proposed giveaway of part of Mabira forest to an investor who will pick US$500 million in timber sales and then plant sugarcane, got a boost on Friday with members of Parliament pressing the government to leave the natural woodlot intact, according to Uganda’s Monitor newspaper. Speaking after a tour of the vast thick forest that provides water shade for Lake Victoria, MPs on the Natural Resources committee said the Mehta family, owners of Sugar Corporation of Uganda Limited Company that is seeking to cut the trees and plant sugarcane on the land, had better look elsewhere. "As we moved around (touring the forest) and brainstormed, we were of the view that the government should explore other ways of increasing sugarcane production in the country without undermining the integrity of Mabira forest, given its value to the current and future generations," Emmanuel Dombo, the committee chairperson, said. "As the East African regional bloc expands, we also want the government to evaluate whether Uganda will specialise in sugar production or select enterprises where we have comparative advantage, unlike sugar manufacturing," he said. But the government on Saturday swiftly dismissed the lawmakers' recommendations as "rushed and inconsequential." "It (MPs recommendation) is premature; they can form their opinion but the final position will be taken only after a cabinet paper [on the proposed forest giveaway] is presented and debated by the whole house [Parliament]," Jessica Eriyo, the State minister for environment said in a separate interview. The minister accompanied the MPs on the tour of Mabira forest on Friday. It has emerged that leaders of Mukono district local government have mobilised residents willing to offer about 30, 000 hectares of land and farm on it as out growers to increase sugarcane production for SCOUL. This option is probably one of the highlights of a parallel report that Microfinance State Minister Salim Saleh submitted to Cabinet following independent studies on how to integrate sugarcane plantation under the mainstream Prosperity-for-All programme. Gen. Saleh reportedly wants individual farmers who have at least four acres of land within vicinity of existing sugarcane plantations to be sourced as outgrowers. This arrangement, to him, would bring extra earnings to the farmers in line with the spirit of the Prosperity for All programme. Daily Monitor has learnt that Cabinet is currently discussing the Gen. Saleh findings alongside the main findings of the ad hoc cabinet committee headed by the Ministry of Environment. In the run up to the November 2007 Commonwealth Heads of Government Meeting (CHOGM) in Kampala, Finance Minister Ezra Suruma had unequivocally told a meeting of Chogm finance ministers in South America that the Uganda government had dropped the proposal to swap part of Mabira forest with sugarcane plantation. President Museveni later resurrected the acrimonious debate over the forest giveaway and stirred public controversy by declaring that the Mabira issue, which caused bloody riots in Kampala early last year, was still under consideration.
