USDA study reflects on the long-term viability of ethanol
31 July 2006
An USDA study has suggested that while ‘making ethanol from sugar could be profitable with current high demand ... it probably won’t be for long ... At recent spot market prices of $4 per gallon, converting sugar cane, sugar beets, raw sugar and refined sugar to ethanol is justified’. However spot market prices are expected to drop as more ethanol is produced. This could go as low as $2.40 per gallon ‘making it unprofitable to produce ethanol from raw and refined sugar’. It notes that Brazil can do this because of its low cost of sugar production. Press reports out of Brussels on an OECD/FAO study suggests that a shortage of feedstock is undermining the competitive production of ethanol in many countries, where it is public-policy interventions that are encouraging and supporting ethanol production.
Editorial comment
For ACP sugar producers the key issue with regard to ethanol production from raw sugar is the price obtainable for the sugar on alternative markets and the import price of petroleum. A thoroughgoing assessment of these factors under various scenarios is required before any decisions are made on investing in sugar to ethanol programmes. This is particularly the case in those ACP countries where a high dependency on high EU sugar prices has existed.
