The U.S. has a really stupid policy on sugar ethanol

[ema1970]

The U.S. has a really stupid policy on sugar ethanol
By Thomas Friedman

The New York Times

I asked Dr. Jose Goldemberg, secretary for the environment for São Paulo state and a pioneer of Brazil's ethanol industry, the obvious question: Is the fact that the U.S. has imposed a 54-cents-a-gallon tariff to prevent Americans from importing sugar ethanol from Brazil "just stupid or really stupid?"

Thanks to pressure from Midwest farmers and agribusinesses, who want to protect the U.S. corn ethanol industry from competition from Brazilian sugar ethanol, we have imposed a stiff tariff to keep it out. We do this even though Brazilian sugar ethanol provides eight times the energy of the fossil fuel used to make it, while American corn ethanol provides only 1.3 times the energy of the fossil fuel used to make it. We do this even though sugar ethanol reduces greenhouses gases more than corn ethanol. And we do this even though sugar cane ethanol can easily be grown in poor tropical countries in Africa or the Caribbean, and could actually help alleviate their poverty.

Yes, you read all this right. We tax imported sugar ethanol, which could finance our poor friends, but we don't tax imported crude oil, which definitely finances our rich enemies. We'd rather power anti-Americans with our energy purchases than promote anti-poverty.

"It's really stupid," answered Goldemberg.

If I seem upset about this, I am. Development and environmental experts have long searched for environmentally sustainable ways to alleviate rural poverty — especially for people who live in places like Brazil, where there is a constant temptation to log the Amazon. Sure, ecotourism and rain forest soap are nice, but they never really scale. As a result, rural people in Brazil are always tempted go back to logging or farming sensitive areas.

Ethanol from sugar cane could be a scalable, sustainable alternative — if we are smart and get rid of silly tariffs, and if Brazil is smart and starts thinking right now about how to expand its sugar cane biofuel industry without harming the environment.

The good news is that sugar cane doesn't require irrigation and can't grow in much of the Amazon, because it is too wet. So if the Brazilian sugar industry does realize its plan to grow from 15 million to 25 million acres over the next few years, it need not threaten the Amazon.

However, sugar cane farms are mostly in south-central Brazil, around São Paulo, and along the northeast coast, on land that was carved out of drier areas of the Atlantic rain forest, which has more different species of plants and animals per acre than the Amazon. Less than 7 percent of the total Atlantic rain forest remains — thanks to sugar, coffee, orange plantations and cattle grazing.

I flew in a helicopter over the region near São Paulo, and what I saw was not pretty: mansions being carved from forested hillsides near the city, rivers that have silted because of logging right down to the banks, and wide swaths of forest that have been cleared and will never return.

"It makes you weep," said Gustavo Fonseca, my traveling companion, a Brazilian and the executive vice president of Conservation International. "What I see here is a totally human-dominated system in which most of the biodiversity is gone."

As demand for sugar ethanol rises, and that is a good thing for Brazil and the developing world, said Fonseca, "we have to make sure that the expansion is done in a planned way."

Over the past five years, the Amazon has lost 7,700 square miles a year, most of it for cattle grazing, soybean farming and palm oil. A similar expansion for sugar ethanol could destroy the cerrado, the Brazilian savannah, another incredibly species-rich area, and the best place in Brazil to grow more sugar.

A proposal is floating around the Brazilian government for a major expansion of the sugar industry, far beyond even the industry's plans. No wonder environmental activists are holding a conference in Germany this fall about the impact of biofuels. I could see some groups one day calling for an ethanol boycott — a la genetically modified foods — if they feel biofuels are raping the environment.

We have the tools to resolve these conflicts. We can map the lands that need protection for their biodiversity or the environmental benefits they provide rural communities. But sugar farmers, governments and environmentalists need to sit down early — like now — to identify those lands and commit the money needed to protect them. Otherwise, we will have a fight over every acre, and sugar ethanol will never realize its potential. That would be really, really stupid.

Thomas Friedman is a New York Times columnist.

source : http://www.thinkfn.com/forum/viewtopic.php?t=8038


PS : i have a non profitable chat room http://chatshack.net/ema666 if you are alone go there.

[rffrydr]

More tales from the short side: Another limit-down day in Corn. Interesting as this "circuit-breaker" will often stimulate trading and on a rare day turn things round to limit-up. There was no real trade on Friday; today will probably be active within a few cents of the limit.

If the ethanol dream in corn is still alive it needs to kick in here pretty soon. Weather will delay some of the announced plantings--but biggest surprise since 1944 is hard to fight. Corn, unlike aluminum, copper before that, or, especially uranium now has to be USED. It can't be squirreled away in distant warehouses for years on end. Hedge funds got a taste of this in the '04 drought market. Then they were trading grains. That was their first big losses. Now they're trading an industry. Thus sentiment is high, very high.

Haven't done the research but this corn market may have excelled the $800 gold market in optimism. After all, it was real this time. Small specs were consistently and painfully short the last year though. Big boost to continuing ethanol operations like PEIX.

I'm looking for $3.05 basis DEC after a summer weather premium trading around $3.40.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

There we go, 10% in a week on 10% margin. You stock guys should broaden your horizons--of course that works in reverse too

http://www.futuresource.com/news/story.jsp?i=i4754272284224061504

Hoarding. They never count on it. How many Hedge Funds long Iowa acres will be praying for Global Warming this summer?
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

The Retailers' view:

http://www.cnbc.com/id/15840232?video=234434374&play=1
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Despite the power of the farm lobby I expect this tariff to be unwound over the next year or two as the Bush 20% mandate and continued high gasoline prices into driving season pressure powerful but declining Farm Lobby.

WSJ March 15

SAO PAULO, Brazil -- Some big-name U.S. investors are behind a new company that plans to produce as much as a billion gallons of ethanol a year in Brazil, about a fifth of the country's current total production of the renewable fuel.

Backers of the new company, Brazilian Renewable Energy Co., include venture capitalist Vinod Khosla, American supermarket magnate Ron Burkle and AOL founder Steve Case, according to an investor in the company. The deal is expected to be formally announced today, people involved in the deal said yesterday.

Brazil's ethanol industry, which uses sugar cane to make the fuel more cheaply than in the U.S., where ethanol is made from corn, is drawing growing interest from private-equity investors. Amid concerns about growing energy demand, renewable energy of all kinds -- including solar and wind energy -- has seen investment levels soar recently.

Politically, ethanol is turning Brazil and the U.S. into closer allies, and President Bush signed an ethanol pact during a visit here last week. Though short on specific measures, the agreement was a sign to investors that global trade of ethanol could grow quickly. Mr. Bush has called for the U.S. to replace 20% of the gasoline it uses with renewable fuels within 10 years.

The new company -- known as Brenco -- closed an initial financing round of $200 million this week, said Ana Fernandes Kertesz, a vice president of Goldman Sachs in Brazil, which is acting as Brenco's placement agent. "It's the first equity raised, but there is more to come," she said.

Brenco, based in Bermuda, will be run by Philippe Reichstul, formerly chief executive of Petrobras, Brazil's state oil concern. Petrobras said on Tuesday that it would begin work on an ethanol pipeline this year.

The new company will join other private-equity groups looking to expand Brazil's ethanol output. Brazil produced 4.5 billion gallons of ethanol last year, and exported about 20% of that, mostly to the U.S. However, exports are widely expected to boom as global-warming and energy-security concerns speed a shift to alternative fuels.

Samir Kaul, a partner at Khosla Ventures, couldn't be reached yesterday, but he previously confirmed Mr. Khosla's involvement in the venture. Gerry McConnell, an executive with Mr. Burkle's Yucaipa Cos, didn't return a phone message. A spokesman for Mr. Case declined to comment.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Well, not quite. But the wolfman is now at it:

http://www.msnbc.msn.com/id/17599048/
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Policy just got a whole lot less so:


http://biz.yahoo.com/ap/070304/brazil_us_ethanol.html?.v=7
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Tyson trying to pass on the pain.

http://www.marketwatch.com/news/story/tyson-sees-higher-prices-poultry/story.aspx?guid=%7B3C231637-B6A0-4CC2-AF42-34E2073A73B2%7D

Even Dove Barry says no cut soon.

[rffrydr]

The July/Sep is just the diff. between end of the tight old crop and harvest-lows new crop. Old is presumably more surprised by the ethanol demand.

I think the basis is wider than contango reflecting the average difference between demand now and potential big demand next year, necessary to guarantee planted acres next year. More-or-less finite area and choice of crops.

High prices and wide basis are unusual. Tight markets make for high prices. The answer really is that it is more than one market now.

Front Dec is still loaded with funds so sell could come anyitme. The roll helped me out.

Another way to trade sell corn buy wheat.

[nodoodahs]

Serious contango going on? July much higher than contracts either before or after.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[rffrydr]

In the grains, seems no matter what the weather, there WILL be a drought scare in the Spring. July is a dangerous month. PUTs only.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Ethanol producers currently breakeven at 4.60/bushel corn--the LAST on the demand chain. The range of private estimates for the, at the very least 1/3 increase in 07/08 eth. production, is a HUGE 600million bushels.

First goes chickens, then goes hogs. Throw in an enevitable birdflu scare and Sanderson Farms short anyone?

Short corn? Most of the Trade will be looking to USDA March Report for guidence. Gonna need some outlier (like sugar reform, Brazilian ethanol free trade) or somethin. Still not record longs--unlike soybean and wheat.
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Today is the Tomorrow you worried about Yesterday!

[nodoodahs]

Thinking about buying puts on the July?
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[rffrydr]

Bid a fond farewell to Corn today. Neutral. 4.20-60 wouldn't surprise me but that would be almost (a)historical--04 excepted.

[dash]

Interesting article in last month's Wired:

http://www.wired.com/wired/archive/14.10/ethanol.html

[rffrydr]

Ethanol up 20% from sept. lows vs. 11% gasoline. At $1.70/bushel profit nothing here is slowing this industry.