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[DallasDude]

Cargill's Brazilian Ethanol Imports Put Corn Growers Into Vapor Lock
May 18, 2004
Peoria Journal Star (IL)


While American corn planters rolled onward this spring, Cargill Inc. rolled forward with negotiations to build a dehydration facility in El Salvador that would convert Brazilian cane-based ethanol into fuel ethanol to be imported - tariff-free - into the United States.

Why would Cargill import Brazilian (those pesky Brazilians!) ethanol as thousands of U.S. farmers lay out hundreds of millions of dollars to build ethanol plants across the cornbelt?

First, because globe-straddling $60 billion Cargill can.

Second, it's legal. Under the recently announced Central America Free Trade Agreement (CAFTA), a "carve-out" or special treatment dating to the 1984 Caribbean Basin Initiative (CBI) permits up to 7 percent of the previous year's U.S. ethanol output to be imported duty free.

That means 230 million gallons of the fuel additive could flow around tariff dams and into the United States in 2004. As the United States moves toward its goal to produce 5 billion gallons by 2010, the tide of tariff-free ethanol could swell to 350 million gallons.

Third, Brazilian (those pesky Brazilians!) ethanol is three times cheaper than U.S. ethanol, about 60 cents a gallon compared with today's American price of $1.80 a gallon.

Fourth, Brazil (those pesky ... ) has the ethanol. It is the world leader in sugar production, ethanol production and ethanol exports. In 2003, Brazil harvested 350 million metric tons of cane, produced 3.6 billion gallons of ethanol and owned 50 percent of the global ethanol export market.

When the National Corn Growers Association got wind of Cargill's plans, first reported by Reuters on May 6, the group's leaders vapor-locked. NCGA and Cargill have longstanding ties, from Capitol Hill lobbying efforts on free trade, biotech and ethanol to Cargill's participating in and partially funding NCGA events.

NCGA took a few days to clear its carburetors before sending a "sharply" worded letter from its president, Dee Vaughn, to Cargill buddy and boss Gregory Page May 10. After moaning about the global food giant's motives ("... it is disheartening and curious ..."), NCGA cut to the chase.

Today, 75 U.S. plants produce 3.2 billion gallons of ethanol, and 13 plants with 500 million gallons capacity are being built, Vaughn said. "But Cargill is not investing in any of these facilities or in expansion of existing plants owned by the company."

Also, "The intent of the (CBI/CAFTA) carve-out was to promote economic development" in poor Latin American nations, "... not merely to serve as a vessel to enhance the bottom line of a multi-national company like Cargill."

Naivet aside, Vaughn finally got to the punch line: "I fear Cargill's actions will only further erode support for the agricultural trade agenda in the United States ..." because "(w)hile NCGA supports an aggressive trade agenda, we cannot move faster or farther than our grassroots."

If you reread those lines slowly, the flashpoint between NCGA and Cargill is not the threat of imported ethanol, Cargill's bottom line or even the company's ability to push longtime friends to the floor when big money beckons.

No, NCGA's real fear is that Cargill's intention to invest in imported ethanol threatens to undermine the friends' collective goal of an "aggressive free trade agenda ... faster and farther than our grassroots" are willing to go today.

In short, while both know free trade will bring cheaper Brazilian ethanol - and cheaper cotton, beef, wheat, soybeans, sugar, vegetables, poultry and pork - into the United States sooner or later, NCGA's good old boys prefer it to be a little later than a little sooner and not ethanol at all.

But that's not how it works with free trade. If you're in for a pint today, you're in for 350 million gallons tomorrow. And when it comes to money, well, even old friends will hang you out to dry - or, as in this case, evaporate - in a Minnetonka minute. Truth is, however, Cargill has every economic and legal right to move ahead with its ethanol import plan and agbiz toadying, knee-jerk free-trade farm groups did most of the heavy lifting to make it not only possible, but likely.

[DallasDude]

SUGAR CONFERENCE: Brazil, Ethanol Hot Sugar Issues, Worldwide Sugar Producers Talk Business in Weeklong Forum
July 27, 2004
By Mikkel Pates, Herald Staff Writer


FARGO - Sugar producers from 30 countries representing 65 percent of world sugar beet and cane production convened Monday in Fargo to begin the weeklong 8th World Sugar Farmers' Conference.

The first event of its kind in the United States kicked off with welcomes from North Dakota Gov. John Hoeven at the Amity Technology beet equipment factory in Fargo and from Minnesota's Lt. Gov. Carol Molnau at the American Crystal Sugar Co. factory in Moorhead.

In his opening address, Rodger Stewart, president of the World Association of Beet and Cane Growers, from South Africa, gave an overview of an industry on the edge of change. Brazil "dominates the global scene" with its size and recent entries into the sweetener market, Stewart said, speaking to the crowd, which included Brazilian farmers.

"Brazil's sugar and ethanol production and marketing plans hold the key to the future direction of the world sugar price and, therefore, the key to many countries' sugar production strategies and profitability," Stewart said.

Brazil's cane production increased from 300 million tons in 1995 to 372 million tons of cane for the current crop an increase of 24 percent.

"From this, 27 million tons of sugar will be produced, of which 16 million will be exported," he said. "In addition, 14 billion liters of ethanol, equating to 25 million tons of sugar, will also be produced."

Held in check

And while Brazil expands, competitors are being held in check by regulations, weather, disease or world sugar prices, Stewart says. Among his examples:


Australia: A series of years of poor production caused by disease and drought, during a period of relatively low world sugar prices, has led to poor returns. "In the face of considerable financial hardship for Australian growers and millers, a government-financed package has been negotiated to assist with industry restructure and reform."

Thailand: The Thai government has indicated a target production ceiling of 65 million tons of cane well below historic output. "Further, there are encouraging signs that the Thai government is supporting the use of sugar cane in a government-sponsored ethanol initiative."

European Union: The alliance faces twin challenges of membership expansion and regulatory reform. In mid-July, the country announced a plan for a move to tradeable quotas and a significant reduction in support prices. "The final agreed sugar reforms in Europe will have differential effects on the industries supplying Europe," Stewart said. "The position of the suppliers to the European preferential markets from African-Caribbean-Pacific will be very much more difficult." Such reforms could increase production in the so-called "least-developed countries." The Sudan and Mozambique are prominent potential beneficiaries in Africa.
Peader Jordan, a farmer from southeast Ireland attending the conference, said he is on an EU farmers' committee and will fight the plan. Under the plan, the EU would cut production quotas by 16 percent and farm prices by 37 percent, with a 60 percent "compensation for the loss of price." That would sting in a country like Ireland, with its 3,700 growers and 1.3 million tons of sugar beet production.

"Change is necessary, but it's radical," Jordan said.

"A three-year period is too short for adjustment," he said. "The majority of farmers either financially or physically can't adjust" to such a policy.

The Brazilian government and cane processors in that country are "making every effort to increase ethanol's share of the Brazilian fuel pool," Stewart said. "The recent technological advances that have led to the introduction of 'flexi cars,' capable of operating on any blend of petrol and ethanol, is a major boost to ethanol consumption," he said.

Stewart said the World Trade Organization Doha Round could change domestic agricultural policies of member countries. Increases in sugar production "seem unlikely in most sugar-producing countries," Stewart said.

In the United States and France, there have been "major sales of sugar beet factories to the supplying growers as traditional corporate ownership of sugar processing is seen to produce unsatisfactory returns with considerable uncertainty and risk in future regulatory regimes," Stewart said.

At American Crystal Sugar, board chairman Bob Vivatson from Cavalier, N.D., talked about the excellent results farmers have received after Crystal farmers purchased their factories as a cooperative in 1973.

Crystal president James Horvath cited the tremendous growth in 30 years, noting the co-op produces $830 million in revenues. He said American Crystal has been a part of this rush to farmer-owned processing capacity, with its purchase of sugar marketing allocations, including the Sidney Sugars plant in Montana.

Vivatson cited the co-op's success, but also noted that "using business criteria of today, it probably wouldn't have been done. But it was done."

[DallasDude]

June 15, 2005 latimes.com
Homegrown Fuel Supply Helps Brazil Breathe Easy
By Marla Dickerson, Times Staff Writer


SAO PAULO, Brazil — While Americans fume at high gasoline prices, Carolina Rossini is the essence of Brazilian cool at the pump.

Like tens of thousands of her countrymen, she is running her zippy red Fiat on pure ethanol extracted from Brazilian sugar cane. On a recent morning in Brazil's largest city, the clear liquid was selling for less than half the price of gasoline, a sweet deal for the 26-year-old lawyer.

"You save money and you don't pollute as much," said Rossini, who paid about $18 to fill her nearly empty tank. "And it's a good thing that the product is made here."

Three decades after the first oil shock rocked its economy, Brazil has nearly shaken its dependence on foreign oil. More vulnerable than even the United States when the 1973 Middle East oil embargo sent gas prices soaring, Brazil vowed to kick its import habit. Now the country that once relied on outsiders to supply 80% of its crude is projected to be self-sufficient within a few years.

Developing its own oil reserves was crucial to Brazil's long-term strategy. Its domestic petroleum production has increased sevenfold since 1980. But the Western Hemisphere's second-largest economy also has embraced renewable energy with a vengeance.

Today about 40% of all the fuel that Brazilians pump into their vehicles is ethanol, known here as alcohol, compared with about 3% in the United States. No other nation is using ethanol on such a vast scale. The change wasn't easy or cheap. But 30 years later, Brazil is reaping the return on its investment in energy security while the U.S. writes checks for $50-a-barrel foreign oil.

"Brazil showed it can be done, but it takes commitment and leadership," said Roland Hwang, vehicles policy director for the Natural Resources Defense Council in San Francisco. In the U.S. "we're paying the highest prices at the pump since 1981, and we are sending over $100 billion overseas a year to import oil instead of keeping that money in the United States…. Clearly Brazil has something to teach us."

Much of Brazil's ethanol usage stems from a government mandate requiring all gasoline to contain 25% alcohol. Vehicles that ran solely on ethanol fell out of favor here in the 1990s because of an alcohol shortage that pushed drivers back to gas-powered cars. But thanks to a new generation of vehicles that can run on gasoline, ethanol or any combination of those two fuels, more motorists like Rossini are filling up with 100% alcohol again to beat high gas prices.

The exploding popularity of these so-called flex-fuel vehicles is reverberating across Brazil's farming sector. Private investors are channeling billions of dollars into sugar and alcohol production, creating much-needed jobs in the countryside. Environmentalists support the expansion of this clean, renewable fuel that has helped improve air quality in Brazil's cities. Consumers are tickled to have a choice at the filling station.

Officials from other nations are flocking to Brazil to examine its methods. Most will find Brazil's sugar-fuel strategy impossible to replicate. Few countries possess the acreage and climate needed to produce sugar cane in gargantuan quantities, much less the infrastructure to get it to the pump.

Still, some Brazilians said their government's commitment to ditching imports and to jump-starting homegrown energy industries were the real keys to Brazil's success.

"It's a combination of strong public policy and the free market," said Mauricio Tolmasquim, president of a federal energy research agency based in Rio de Janeiro. "That's the Brazilian secret."

Brazil's fortunes have been tied to sugar since the Portuguese conquerors found that their tropical colony boasted ideal conditions for cultivating the tall, grassy plant. Brazilians produce and eat more cane sugar than any people on the planet, so the notion of using it to power their vehicles was a natural. After all, Henry Ford once viewed ethanol, which can be made from corn, barley and other crops, as a strong contender to fuel the Model T.

But the discovery of cheap, abundant petroleum changed everything. Like much of the rest of the world, Brazil guzzled imported crude until the 1970s oil shocks put its economy over a barrel. So totally reliant was Brazil on foreign oil that surging prices wreaked havoc on its balance of trade. That led to massive borrowing, huge deficits and, eventually, hyperinflation and a devaluation of its currency.

Thus the Brazilian government, then a military dictatorship, launched efforts in the mid-1970s to wean the nation off imports. Those efforts included its National Alcohol Program, known as Proalcool.

"To become less dependent was a matter of life and death," said Jose Goldemberg, secretary of the environment for the state of Sao Paulo.

With the help of public subsidies and tax breaks, farmers planted more sugar cane, investors built distilleries to convert the crop to ethanol and automakers designed cars to run on 100% alcohol. The government financed a mammoth distribution network to get the fuel to gas stations and kept alcohol prices low to entice consumers. It worked. By the mid-1980s, virtually all new cars sold in Brazil ran exclusively on ethanol.

But a 1989 shortage coupled with low gas prices soured many on the renewable fuel. Sales of alcohol-only cars tumbled in the 1990s, and the government gradually withdrew its subsidies and lifted price controls on ethanol. Demand stalled.

Some critics at the time chalked it up to the inevitable consequences of government meddling. But today many laud Brazil's Proalcool program for creating a viable domestic market for ethanol, and for spawning an industry with tremendous export potential that now employs more than 1 million Brazilians.

Meanwhile, ethanol remains little more than a boutique fuel in the United States. Although the U.S. is the world's second-largest ethanol maker, producing 3.4 billion gallons last year compared with around 4 billion gallons for Brazil, ethanol's main use is as a gasoline oxygenate to boost air quality rather than as a serious replacement for foreign oil. However, high gas prices have some farm belt legislators pushing Congress to mandate greater use of domestic corn-based ethanol in the nation's fuel supply to reduce oil consumption.

Virtually all cars sold in the U.S. since the early 1980s can run on gasoline containing as much as 10% ethanol. In addition, there are an estimated 5 million flex-fuel vehicles already on U.S. roads that can burn a mixture as high as 85% ethanol. But big logistical and political hurdles remain. Only a few hundred of the nation's approximately 169,000 retail gas stations are equipped to sell so-called E85 fuel. Nationwide distribution would require station owners to invest hundreds of millions of dollars in special tanks and pumps.

Although U.S. ethanol makers say they could easily double their output to meet any increase in demand, experts say that's still a drop in the bucket compared with the tens of billions of gallons that would be needed annually to displace meaningful amounts of oil. The U.S. industry is loath to give up tariffs that protect it from cheaper alcohol from Brazil.

Meanwhile, some environmentalists say feedstock such as grasses and municipal waste offer much more promise than corn. But huge investments in research are needed to get the costs down for this so-called cellulosic ethanol.

What most can agree on is that Brazil is an example of what might have been if America had seriously committed itself 30 years ago to renewable energy.

"If we would have spent one-hundredth of the money that we have spent to send tanks around the world to protect our oil supplies … we would already be using cellulosic ethanol," said Michael Bryan, chief executive of BBI International, a Colorado-based bio-fuels consulting company.

Although public support was crucial in getting Brazil's program up and running, the private sector is now driving growth with flex-fuel cars.

At Volkswagen's sprawling Anchieta plant near Sao Paulo, the gleaming Fox and Polo models inching down the assembly line look just like regular cars. The only immediate clue that they are revolutionizing the Brazilian auto market is the TotalFlex logos on their back windshields.

The company was the first to unveil dual-fuel vehicles in Brazil in March 2003. The technology has proven to be such a hit with consumers that in a little more than two years the company has shifted nearly 90% of its domestic production to flex-fuel capability.

"It was a big bang in the market," Volkswagen spokeswoman Junia Nogueira de Sa said.

Equipped with a single fuel system, these vehicles employ sensors that allow the engine to adjust to gasoline and alcohol in any combination. Flex-fuel vehicles don't cost any more than regular gasoline-powered models. The only visible difference under the hood is a tiny auxiliary fuel tank that holds a bit of gasoline to aid starting on cold days, a common problem with the old alcohol-only models.

Today, a half dozen carmakers, including General Motors Corp. and Ford Motor Co., offer dual-fuel versions of their vehicles in Brazil, and more are on the way. Consumers bought around 48,000 of the vehicles the first year they were available in 2003, representing about 4% of total car sales. That figure quickly jumped to 328,000 cars, or 22% of the total volume, in 2004, and last month nearly half of the new cars sold were flex vehicles. Analysts predict that dual-fuel technology will easily dominate the market within a few years.

Cars aren't the only things being powered by ethanol in Brazil. Small planes such as crop-dusters are converting to alcohol. And Brazil's electrical grid, which experienced a severe shortage in 2001 because of a drought in its vital hydroelectric sector, is getting a charge from sugar.

In contrast to U.S. corn-based ethanol, which requires substantial amounts of fossil fuel to plant, harvest and distill, Brazil's industry uses crushed sugar cane stalks known as bagasse to feed the steam boilers that power its mills and distilleries. The process is environmentally friendly and so efficient that these centers are generating more energy than they can use. Ethanol producers are supplying Brazil's grid with more than 600 megawatts of electricity. The near-term potential is at least 10 times that.

Near the city of Ribeirao Preto in northeastern Sao Paulo state, the harvest is underway in Brazil's richest sugar-cane-producing region. Trucks lumbering under mounds of fresh-cut cane creep into Jardest Sugar & Alcohol. The vast milling and distilling complex, owned by Brazilian sugar trading giant Crystalsev, will run 24 hours a day nonstop until the season ends in December. The air is fetid with char from the fires that are clearing the fields of debris and vermin in preparation for the arrival of teams of scythe-wielding cutters. A lush emerald sea of cane rolls toward the horizon in every direction.

And there is a lot more where that came from. Brazil has about 13.5 million acres planted with sugar cane. More than 200 million dormant acres lie ready to cultivate.

"Oil is running out. The world needs more clean, renewable fuel," Crystalsev executive Maurilio Biagi Filho said. "And we are going to be there to supply it."

[DallasDude]

O Brasil quer aproveitar a tendência altista do mercado de petróleo e as preocupações ambientais para alavancar as exportações de álcool combustível. Para isso, produtores nacionais iniciaram, neste ano, uma agressiva política de difusão do etanol nacional.

No dia 7 passado, o álcool combustível estreou na Bolsa de Nova York como a mais nova commodity brasileira. A expectativa é exportar neste ano 1,5 bilhão de litros de álcool.

Segundo o diretor técnico da Unica (União da Agroindústria Canavieira de
São Paulo), Antônio de Pádua Rodrigues, a participação do álcool combustível ainda "é marginal", com 65% das exportações sendo de álcool industrial.

"A participação do álcool combustível ainda é marginal, mas queremos chegar a 2007 com uma participação firme no mercado internacional", afirma Rodrigues. Segundo ele, o Brasil hoje, sem "precisar de investimentos extras", poderia exportar até 3 bilhões de litros por ano.

Os efeitos da alta do barril de petróleo já se fazem sentir na safra 2003/4, quando o Brasil vendeu mais de 100 milhões de litros de álcool combustível para os Estados Unidos, utilizando operações triangulares com Jamaica, El Salvador e Costa Rica.

O Brasil enviou a esses países álcool hidratado, que foi refinado e vendido como álcool combustível para os americanos. O mercado é promissor: empresários brasileiros já estão investindo em refinarias desidratadoras em El Salvador para entrar no mercado americano.

Mercado promissor

O anúncio de que a Rússia pretende ratificar o Protocolo de Kyoto foi outra boa notícia para o setor, que quer assegurar para o país uma fatia do mercado de energia alternativa que será criado com a mistura de álcool na gasolina, para reduzir a emissão de poluentes.

Para ter uma idéia do mercado que poderá se abrir para a alternativa energética brasileira, o Japão estuda misturar 3% de etanol na sua gasolina. Isso representaria, hoje, 1,8 bilhão de litros de álcool combustível por ano, volume maior do que toda a estimativa de exportação de álcool brasileiro para este ano, somando álcool industrial e combustível.

De olho nesse novo mercado, a Alcopar (Associação dos Produtores de Álcool do Paraná) espera vender 100 milhões de litros para os japoneses ainda neste ano. Segundo Adriano da Silva Dias, superintendente da Alcopar, o Japão aparece como "um mercado promissor a médio prazo".

O entrave nesse processo é a decisão do governo norte-americano de não ratificar o Protocolo de Kyoto (os EUA são responsáveis pela emissão de 36,1% do gás carbônico no planeta, e a Rússia, por 17,4%). A decisão norte-americana afeta a entrada em vigor do protocolo, que prevê a redução de 55% na emissão de gás carbônico.

Além de países da Europa, outro mercado de interesse dos produtores nacionais é a China, onde nove Províncias já são obrigadas a misturar 10% de etanol à gasolina.

Segundo Rodrigues, os Estados nordestinos poderão ser os grandes beneficiados com as exportações de álcool. "O usineiro nordestino possui uma melhor logística para exportar. Eles não precisam estocar o álcool nos portos. Pode sair direto da usina para os navios. Isso conta muito no momento de exportar", afirma. Hoje, os Estados nordestinos são responsáveis por 35% das exportações de álcool do país.