MEXICO: Santos planning US$12 billion ethanol initiative

Mexican sugar producer Grupo Santos is planning a US$12 billion ethanol initiative despite the fact that Mexico's legal framework would block project development, Grupo Santos president Alberto Santos de Hoyos told Business News Americas.

The project would entail building 60 ethanol plants that would produce a total of 381.4 MMcf per year of ethanol using sugarcane as feedstock, the paper reported. Each plant would require roughly three years of construction, Santos de Hoyos said.

According to the plan, landowners would provide land in exchange for a 40% stake "in the company that produces ethanol," he said. The landowners would receive preferential shares that guarantee minimum revenue during the three-year construction period.

However, Mexico's constitution limits land use by private owners to 1.1 square miles (3 sq km) for sugarcane cultivation, but Santos' project would require a minimum of 97 square miles (250 sq km) of sugar cane per ethanol plant, Santos de Hoyos said. Were the landowners to remain with their property and sell Santos their sugar cane for ethanol production, the project would not be viable.

Under that scenario, the producers would sell their crop to the company at the uncompetitive price of US$38 to US$40 per tonne due to inefficiency in cultivation, Santos said. By comparison, Santos would produce sugar cane at the internationally competitive cost of US$18 per tonne due to economies of scale and greater efficiency.

"What we need to do now is search for the formulas to be efficient, to be productive and to be able to be competitive on a global level. What that requires is industrial-style work on the land," Santos de Hoyos said.

Santos offered to build the first of the 60 plants with its own capital to convince investors of the benefits, although that may not be necessary. The company recently held an informal meeting with Credit Suisse to present the project, Santos de Hoyos said. "They liked the project and offered, without any commitment, to provide the US$12 billion if we can convince the Mexican congress and the government to make the use of ethanol by [state oil company] Pemex obligatory," he said.

Credit Suisse would provide the funds partly as risk capital and partly as a loan. Santos has not met with Credit Suisse since then as the project remains unconstitutional.

Grupo Santos has presented the project to various lawmakers in the upper and lower house who were "very receptive," Santos de Hoyos said. "There has been a very good response. They would have to discuss a modification to the constitution, which is a little more complicated for political reasons."

US: EPA to have increased role in biofuels

The US’ Environmental Protection Agency will soon have a greater hand in US-produced biofuels, even more than the USDA, according to the Des Moines Register.

The person the next president appoints as administrator of the environmental agency could well decide what happens to the prices of maize, soybeans and many other commodities.

That's because of the role the agency will have in deciding how much of the nation's crops are converted into ethanol, biodiesel and other biofuels and how quickly that happens.

The agency can waive or lower the annual targets, and the agency also will decide what kind of fuels will qualify for meeting the mandate and possibly even whether there is a sufficient market for using all the ethanol that will be produced in coming years.

It's no accident that the Environmental Protection Agency, or EPA, has these broad powers. Environmentalists, led by the Natural Resources Defense Council, insisted on it, and House Democratic leaders made sure that the agency's authority was written into the new energy bill.

"At least on paper, the EPA has a lot of authority," and the agency's decisions "are going to have major impacts on agricultural markets," said Pat Westhoff, an economist at the University of Missouri.

Consider the ways the agency could affect the production of biofuels and consequently the price of maize, soybeans and other commodities:

The energy bill requires usage of up to a billion gallons of biodiesel annually. However, the EPA can waive that requirement if the agency believes it will increase diesel prices significantly. That's a distinct possibility, given the soaring prices of vegetable oil, experts say. Guess who wanted that provision in the bill? Yes, truckers.

The maize ethanol mandate could be waived if the agency finds that there is a serious harm to the economy or the environment. Under the energy bill, refiners would be allowed for the first time to petition for the waiver. Previously, only states could do so. The EPA also could decide on its own to consider waiving the mandate.

Imported sugar-based ethanol could qualify to meet the energy bill's annual consumption targets for "advanced biofuels." Such fuels are likely to be in short supply and fetch a higher price than conventional maize ethanol, Westhoff said.

The energy bill also requires that production from new domestic biofuels plants meet standards for reducing greenhouse gas emissions. The agency has some leeway in deciding how that analysis is done, but the agency has to take into consideration the impact on global land usage.

INDONESIA: US$5.9 billion in biodiesel plans scrapped over feedstock prices

Indonesian palm oil growers are scrapping or amending plans to make biodiesel after the commodity's surge to a record made the projects unviable, according to Bloomberg.

Sinar Mas and China National Offshore Oil have halted a US$5.9 billion biofuels plan, director Rafael Concepcion said yesterday. PT Bakrie Sumatera Plantations was “redesigning” a biodiesel project, president director Ambono Janurianto said.

Palm oil prices have more than doubled in the past year, undermining the economic rationale for turning the vegetable oil into diesel even as governments worldwide mandate greater use of alternative fuels. The increased use of palm oil and other plants including sugar was meant to stretch fossil-fuel supplies.

“Crude palm oil is very expensive now, it's impossible for companies to make profit if it's used as biodiesel,” said Alhilal Hamdi, head of Indonesia's National Team on Biofuel.

“We are postponing it indefinitely as it's economically not feasible,” Concepcion said, referring to the venture with China's third-largest oil company. “The price of the raw material alone is already higher than the price of biodiesel.”

BRAZIL: GMO cane may have to wait for regulatory approval

Sugarcane genetically modified for greater ethanol and sugar production could be developed in three to five years but strict Brazil biotechnology regulation could keep it off the market for as much as seven years, according to Reuters.

Scientists are field-testing GMO cane varieties with higher sucrose yields than conventional ones, said Brazilian leading biotech companies Alellyx Applied Genomics and Sugarcane Technology Center (CTC).

"At this point, (the GMO cane) is more a regulatory issue than a scientific issue" said Paulo Arruda, scientific director at Alellyx Applied Genomics, developer of a variety being tested in the fields.

"If there are no major regulation setbacks, our target is to launch our first (commercial) variety in 2013/2014," Arruda said in a workshop promoted by sugar analyst FO Licht.

Brazil cleared commercial use of GMO soybean and cotton after passing a biosafety law in 2005, but it has taken until February 2008 to approve any other genetically modified agricultural product.

The Alellyx genetically modified sugar cane program is focused not only in developing cane with a higher sucrose yield, but also with increased biomass and resistant to herbicides and insects and to drought.

The company, which has an agreement with US biotech giant Monsanto, is especially interested in supplying GMO cane for Brazil's new cane frontier.

"Most of Brazil's new cane areas are degraded pastures, where pluviometric levels are lower than traditional cane producing areas," Arruda said, explaining the importance of drought resistant varieties.

"We'd be happy if technology allows us to have 10%-15% higher yields given the adverse conditions," he said.

"In three to five years it'd be possible for us to have available varieties (if regulation was okay)," Jaime Finguerut, industrial strategic development manager at CTC, told Reuters in the sidelines of the workshop.

Through the use of existing varieties, it's possible to raise conventional cane yields currently by around 2% per year. With GMO cane it would be possible to double this growth, Finguerut said.

But Arruda, from Alellyx, said government approval of GMO cane varieties should be simpler than other crops like soy or corn, which took years to be accepted in Brazil, as cane is not used directly as food.

Grain ethanol companies to feel the pinch in 2008

Even if maize prices were to fall, it would unlikely translate into higher profit margins for ethanol producers, according to Dow Jones.

Christoph Berg, managing director of F.O. Lichts in Germany, said maize prices have to fall much further for publicly traded ethanol companies, especially in the US, to see better profit margins.

Companies such as Pacific Ethanol and Verasun have been underperforming the Dow Jones Industrials Average and the Standard and Poor's 500 index all year.

In 2007, gasoline prices rose 7% year over year and corn ethanol prices rose 45%, but Berg said ethanol companies in the US are barely above junk-bond status because of the risk associated with ethanol.

Some of those risks, Berg said, include the new and growing food-versus- fuel debate, which has many nations deciding to slow down or do away with ethanol policy because of climbing food prices, caused by rising grain futures in the US and Europe.

"Food-versus-fuel will shape up to be a topic for years to come. There are more 'ifs' and 'buts' in the legislative process now than in previous years," said Berg, adding that Europe is also still debating what to do with ethanol. If Europe consumes less ethanol, it could affect Brazil's exports as well as futures prices for wheat and other grains, which have been rising, in part because of demand for ethanol.

Berg said China is looking for non-food fuel stocks for ethanol and has been unsuccessful. India is considering an ethanol mix but the oil industry there does not want to offer any big ethanol-gasoline blends.

"India's window of opportunity for ethanol is closing. Australia is likely to remain a medium-sized player but lacks government support for ethanol."

Berg said the ethanol market will continue to be local, in the US, Brazil and Europe. He doubts there will be a rise in Brazilian ethanol exports to the US this year.

"There is a chance you could see direct exports of Brazil ethanol to the US because of demand coming from the southeastern states. Then there is always the sorry state of EU's grain ethanol market that might provide some opportunities to Brazil.”

BRAZIL: Datagro sees ethanol export boost after 2015

Brazil's sugar and fuel ethanol prices will be ever more influenced by higher numbers of flex fuel vehicles at home and by ethanol exports in the future, Plínio Nastari the president of the Datagro consultancy said on Wednesday, according to Agencia Estado.

He added exports will get a boost after 2015.

He added that the correlation of sugar and ethanol prices with those of other fuels will increase from now on, especially in the case of gasoline and oil.

He forecast that up to the 2014/15 sugarcane crop year, Brazil's ethanol industry will largely have a domestic focus and that exports will only realty take off after then.

The expectation is that from 2015, the U.S. will have reached the limits of its maize-ethanol production capacity and will raise imports, which should favor Brazil.

"Sugarcane ethanol will complement the grain-ethanol supply," said Nastari.

Datagro forecasts that by the 2024/25 crop year, Brazil will be producing 1.59 billion tonnes of sugarcane a year, resulting in 103 billion litres of ethanol and 66.6 million tonnes of sugar.

"Of this total, 25 billion litres of ethanol and 46 million tonnes of sugar will be exported," said Nastari.

He added that in 2025 Brazil will have the capacity to meet 30% of the US ethanol deficit.

"But it's worth mentioning that Brazil won't be the only player on this market in the future and will probably have to compete with other countries in South America, and in Africa," he said.

Nastari also forecast that by 2025, Brazil's sugarcane-planted area will total 16.8 million hectares, of which 72% destined for ethanol production.

BRAZIL: Czarnikow sees sugar prices curbing ethanol production

Czarnikow expects Brazilians to fill their tanks with more ethanol than petrol in 2009, according to Dow Jones.

"Five years ago, everyone thought ethanol would just disappear, but in 2009 we expect ethanol consumption to be greater than gasoline," said Marcos Molinari, director of the Czarnikow group in Brazil.

Molinari bases his expectations on increasing domestic sales of flex-fuel automobiles.

ED&F Man says Brazilian ethanol entering the US duty-free

Brazilian ethanol is coming into the US on a tax loophole that helps favor big oil and ethanol traders, according to Dow Jones.

"The big players are all the major oil companies who are taking advantage of a tax loophole that essentially makes importing ethanol from Brazil duty free," said William Maloney, a consultant of business development for ED&F Man Biofuels.

There are three ways companies are importing ethanol from Brazil: directly from Brazilian sellers, indirectly through the Caribbean, which enjoys duty free entry into the US, and another way is through a direct drawback basis.

"The drawback is a loophole in the tax rules which compared ethanol with jet fuel, and that loophole allows us to import ethanol and export jet fuel within 3 years and get the tax credit," he said.

Senator Charles Grassley, R-IA., is looking to get rid of that loophole, said Maloney. ED&F Man doubts the loophole will last much longer.

Maloney said Washington let the tax loophole slide back in 2006, after the removal of Methyl Tertiary Butyl Ether, or MTBE, from gasoline was required. Once MTBE was eliminated, demand for ethanol, to use used as a mix, increased. At the time, Brazil ethanol exports to the US exploded.

The current tariff on Brazil ethanol is 54 cents per gallon plus a 2.5% ad valorum.

Brazilian ethanol companies and some ethanol traders have tried to convince the US congress to do away with the tariff but US ethanol companies and politicians in maize-growing states have been more successful at keeping it in place.

"If the tariff were ever removed, it would put Caribbean ethanol companies out of business," said Maloney. Last week, US Federal Reserve Chairman Ben Bernanke hinted that importing more ethanol from Brazil made economic sense but he did not advocate a tariff cut.

Some big commodities investment banks have suggested that a tariff removal would send big US ethanol players on a shopping spree in Brazil.

"With a tariff removal, you would see the traditional guys like ADM and Cargill looking to buy already-existing companies or expand their own facilities," said Maloney.

S: Group calls on consumers to oppose GMO beet

A group of socially concerned US investors has launched a public campaign calling on food companies not to use a controversial new genetically engineered sugar beet crop that is to be planted for the first time this spring, according to the Financial Times.

The Interfaith Center on Corporate Responsibility (ICCR) is calling on consumers to write to 63 companies, including Heinz, Campbell's Soup, General Mills and Kraft, asking them to say they will not use a new sugarbeet strain developed by Monsanto.

The ICCR is a coalition of more than 300 faith-based institutional investors that has been in the vanguard of successful efforts to make companies more responsive to a range of social and environmental concerns.

Its members have filed shareholder resolutions calling on the McDonald's and Wendy's restaurants chains and Safeway supermarkets to label products that contain genetically engineered ingredients.

In a break with its usual focus on shareholder resolutions, it has launched a web-site, www.dontplantGMObeets.org , that calls on consumers to send letters to the management of the food companies that are the focus of its campaign. The letter cites survey claims that 50% of US consumers would prefer not to buy GM products, and calls on the companies "to publicly oppose the spring 2008 planting of genetically modified sugar beets."

The "Roundup Ready" sugar beet in question was approved for planting by the US Department of Agriculture in March 2005. It has been genetically engineered to make it resistant to Monsanto's Roundup herbicide.

In January, four activist groups opposed to GM crops, including the Sierra Club, the largest US environmental group, filed a lawsuit in California calling on the agriculture department to review its approval of the beets.

A similar lawsuit led a federal judge to issue a nationwide ban last year against further planting of Monsanto's Roundup Ready alfalfa, pending a further environmental review by the federal government.

Leslie Lowe, of the ICCR, said that leading food companies, including McDonald's, Camp-bell's Soup, General Mills and Anheuser Busch, had already chosen not to use a variety of genetically engineered ingredients. "This is a front-burner brand, reputation and consumer confidence issue (for the companies)," she said.

Venezuela building four ethanol plants

Venezuela is building at least four ethanol plants to convert sugarcane and yucca into fuel, according to Bloomberg. Petroleos de Venezuela SA, the state energy company, has an agricultural subsidiary working on plants in four states, the Caracas-based newspaper El Universal said, citing the unit's president, Eglis Ramirez. Ramirez expects to begin ethanol production in the first quarter of 2010, the newspaper said. One of the plants will process 10,000 tonnes of sugarcane a day to make 700,000 litres (6,000 barrels) of ethanol a day, Universal reported, without saying how much the other plants will make.

PAKISTAN: Controversy over “banned” cane

Almost all sugar millers in the district have declined to purchase cane saying that farmers had cultivated the varieties which were banned by the government, according to Pakistan’s Dawn newspaper. Millers claimed that the varieties of CPF/238, 79 and India were banned by the Punjab sugarcane commissioner for sowing and crushing so they were unable to purchase these crops. On the other hand, farmers claimed that they were unaware of the banned varieties and some of them said they had got the seed of these varieties from the mills of their respective areas. A local cane industry leader claimed that Chaudhry Sugar mills had started the purchase of all the three banned varieties at the start of the crushing season, but with deduction of 10% weight. Later, the miller was purchasing cane with the deduction of 25% and thereafter with 50%. But now with the start of the current month, the miller refused to accept these varieties.

AUSTRALIA: Some cane farmers looking for way out of industry

Cash-strapped sugarcane farmers in parts of Australia's Queensland are plundering their life savings to survive, but say their pleas for help are being ignored, according to the Gold Coast Sun newspaper. The growers say they are losing about A$88,000 (US$81,907) every year because they cannot compete with cheaper Brazilian sugar which has flooded the market in the past 10 years. With banks bearing down threatening to take their farms, and their life savings dwindling quickly, the farmers are desperately hoping the State Government will throw them a lifeline and find a new use for the land so they can leave the 'unsustainable' industry. Canegrowers Rocky Point director Tony Huth, a third-generation cane farmer, said 80 per cent of growers supported a planned A$650 million motorsport park on 600ha of cane farming land. He said the park was a light at the end of the tunnel which would start a transition from agricultural land to alternative uses, including industry, recreation and residential. Last month the Sun reported some cane growers opposed the motorsport project, believing it would kill the industry. However, many other growers, including Elwin Truloff, who has been a cane farmer for 50 years, plan to leave the industry once this year's crop has been harvested. "The land can grow grass. I'm finished," he said. "We've put up with it for a long time now and I've had it. You can only take so much. Farmers are leaving the land in droves. In 2002, there were 6000 cane farmers in Queensland, and now there are only 4000." Cane farmer David Huth said only 237,000 tonnes of cane was harvested in the region last year, compared to 438,000 a year in the late 1990s. He said many farmers would pack up and leave unless the State Government started looking at ways to wind down the industry and give them a return on their land. "Future land use has to be determined while the sugar industry is still alive, otherwise the social and economic disruption will be far greater and the land will be abandoned," he said.

Russia eyes place as major biofuel producer

Russian President Vladimir Putin said that Russia aimed to play a prominent role in the biofuel industry, according to ITAR-TASS. "Due to the increasing role of biofuel in the global energy industry, attention will be focused on countries that have a sufficient amount of farmland to supply (the biofuel industry)," Putin said at a meeting with President-elect Dmitry Medvedev and members of the State Duma, the parliament's lower house. "Among these countries, Russia will play a prominent role." He also named the US, Canada, Australia and Brazil among these countries. Putin was commenting on a statement by Boris Gryzlov, speaker of the State Duma. Gryzlov said that he believed half of Russia's 20 million hectares of unused farmland should be used for biofuel production.

Belarus to boost 2008 sugarbeet harvest to 3.71 million tonnes

Belarus plans to increase sugarbeet output 2.3% on the year in 2008 to 3.71 million tonnes, according to Prime Tass. Areas under sugarbeet will amount to 95,300 hectares in 2008. Gorodeya Sugar Refinery is expected to procure 1.005 million tonnes of sugar beet in 2008, Slootsk Sugar Refinery 1 million tonnes, Zhabinka Sugar Refinery 925,000 tonnes and Skidel Sugar Refinery 780,000 tonnes. Harvesting will start on September 1, 2008. Procurement will be completed on November 20. In September, sugar refining is supposed to amount to 760,000 tonnes, in October 836,000 tonnes, in November 823,000 tonnes, in December 823,000 tonnes and in January 468,000 tonnes. In 2007, sugar beet output declined 8.9% year-on-year to 3.626 million tonnes.

 

Conoco to invest up to US$3 billion in ethanol

Chief Executive Jim Mulva said on Wednesday the company would consider an acquisition or investment of up to US$3 billion to move further into the ethanol business, according to Dow Jones. Mulva, speaking at the company's annual meeting with analysts in New York, said any acquisition or investment would likely focus on non-maize-based ethanol. He said any larger acquisitions were highly unlikely.

US: UNICA looking for ethanol tariff based on oil price

Brazil's UNICA is looking for the US to drop its tariff on Brazilian ethanol, but if that won't happen then a variable tariff based on the price of crude oil should suffice, according to the Des Moines Register.

A provision in the Senate-passed farm bill would extend the tariff through 2010. The future of that extension is in doubt because of the Bush administration's opposition to including tax measures in the farm bill.

Still, Iowa Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, which has jurisdiction over tariffs, won't hear of ending the tariff. He argues that eliminating the tariff would amount to subsidizing Brazilian ethanol since it would qualify for the 51-cent-a-gallon US tax credit for ethanol. And, Grassley argues, there's no need to make it easier to import Brazilian ethanol when the Caribbean allowance isn't being filled.

UNICA president Marcos Jank said the tariff should at the very least be no higher than the US tax credit. For now, the tax credit is 51 cents. But there are plans in Congress to lower it to 46 cents so that the savings can be used to create a supplementary subsidy for ethanol pr