seminar on biofuels study in...

Potential and challenges in the international market for ethanol and bio-diesel

Seminar on Biofuels Study in Mozambique

11-12 July 2007

André Meloni Nassar• Director-General, Brazilian Institute for International Trade Negotiations

Research teamLuiz Fernando do Amaral and Marcelo Moreira

OUTLINE

Biofuels market drivers

Ethanol and biodiesel feedstocks

Biofuel policies

Biofuel world market

Current situation

Perspectives

Petroleum4.252 MT

(184,9 BGJ)

Ethanol36 MT

(0,96 BGJ)

Sunflower31 MT

Biodiesel3,2 MT

(0,12 BGJ)

Castor Seed1,4 MT

Soy214 MT

World Production(million tones, 2005)

Notes: 2003 for palm, gasoline, diesel, LPG and Kerosene. * Distillated Diesel. LPG: Liquefied petroleum gases. ** BGJ = Billions of Giga Joules. Sources: FAO, Oil World, F.O. Licht, LCM, EIA. Elaboration: ICONE.

Rapeseed47 MT

FOSSIL RENEWABLESRaw MaterialFuelRaw Material Fuel

Gaso-line

1237 MT(53,8 BGJ)

Diesel*1077 MT(46,1 BGJ)

Total (Energy Equiv.)** = 115,7 BGJ 1,1 BGJRenewables/Total: 0,9%

Palm8 MT

LPG391 MT

(11,9 BGJ)

Kerosene92 MT(3,9 BGJ)

Sugar Cane1,292 MT

Corn702 MT

Wheat628 MT

Diesel and Gasoline Consumption

0 100 200 300 400 500 600

US

EU-27

Japan

China

India

Billion liters

201520102005

Gas.Diesel*

Note: * Highway diesel. Based on Cera’s Asian Fenix Scenario. Source: CERA, Dawn of a New Age. Elaboration: ICONE.

Source: Icone

Biofuel World Market: Growth Drivers

Low importanceLow importanceVery important (energy balance)Feedstock efficiency

Domestic and importsDomesticDomestic and importsSupply policy

Low border protectionHigh border protectionLow border protectionTrade policy

Low importance

Tax exemptionDirect subsidies

European UnionUnites States

Developing countries

Support to farm income; rural development

Biofuels Program: Main Drivers

Very importantVery importantNatural resources

availability (land and water)

Tax exemptionMandatory blendsDomestic policies

United StatesDeveloping countries

China and India (today)

European UnionChina and India (future)

Regions/countries examples

Energy security; high oil prices

Climate change; reduction on green

house gases emission

Drivers: climate change and energy security;

Technical standardization accepted worldwide;

Elimination of border protection (tariffs and no tariff

barriers);

Stable, organized and widespread supply and demandSupply: efficient feedstocks;

Demand: mandatory blends and tax exemption;

No negative impacts in food market;

Structured financial market: future markets, pricing

mechanisms, liquidity, risk management, etc.Source: Única, Icone

Conditions to Create a World Marketfor Biofuels

The World Biofuel Market

(iv) Financial

Market

(i) Supply(ii) Demand

Technical Improvements• Cellulosic ethanol

• GMOs• Agricultural techniques

Agricultural feedstock:

• Productivity (liters/ha)• Energy balance• GHG

emissions• Availability

Replacement Targets

• Energy security and environmental

concerns

Biofuel use• Pure Fuel• Additive

Positive impact

Negative impact

Impact’s result varies

Oil prices

Mandatory blends

Stable supply

(iii) Policies

Tax exemptions Barriers to

trade• Tariffs• Border

protection measures

International Trade Policy

Regime• World Trade Organization

Available water and land resources:Potential for developing countries

Note: Harvest area in 2004, potential arable lands.Source: FAO (2000); FAO (2007). Elaboration: ICONE.Mapa elaborado com auxílio do programa Philcarto, disponível em http://perso.club-internet.fr/philgeo

ND ND -- + +

Water

Land

1º

3º

2º4º

Xº Top cane producers

Top palm producersXº

Tropical zone

1º2º

3º

Hydrolysis

Sugar Cane: Source of Energy

Hydr

olys

is

1/3JUICE

1/3BAGASSE

1/3STRAW

SUGAR(153 kg/t)

ETHANOL CO-GENERATIONOF ELECTRICITY

MOLASSES

165 kg/t 15%humidity

276 kg/t 50% humidity

Source: UNICA

Cellulosic ethanol revolution: when will it take place?

Straw: tops and leaves of sugar cane

OUTLINE



Biofuel policies


Current situation

Perspectives

Fossil Energy Balances(estimates)

Note: Figures represent the amount of energy contained in the listed fuel per unit of fossil fuel input. Source: Various, compiled by World Watch Institute.

ETHANOL BIODIESEL

0123456789

10

SugarCane

Wheat SugarBeets

Corn Palm Oil Wastevegetable

Oil

Soy Rape

Ethanol Yields

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

SugarcaneBrazil

Beet EU SugarcaneIndia

Corn US CassavaThailand

WheatEU

Source: IEA – International Energy Agency (2005) e MTEC.

Liters per Hectare

pote

ntia

l

Biodiesel productivity

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Palm Rapeseed Sunflower Castor seed Soy CottonNotes: Brazilian productivity for palm, castor seed and cotton (2005). European productivity for Rapeseed (2006). Sunflower and Soy values represent average of Brazilian, European and North American productivities (2002 and 2005). One liter of oil assumed to produce one liter of biodiesel. Sources: IEA 2005,MAPA and GMF

Liters per Ha

0 10 20 30 40 50 60 70

Europe

China

US

Australia

Thailand

Brazil

Ethanol: Production Costs (2005)(US$ cents per litre)

Cane

Cane

Cane

Corn

Corn

Wheat/Beet

Source: O. Henniges and J. Zeddies, “Economics of Bioethanol in the Asia-Pacific: Australia-Thailand-China”, in F.O.Licht´s. World Ethanol and Biofuels Report, vol. 3, n. 11, 2005.

Green House Gases reductions: ethanol’s vs. gasoline’s emissions

Note: Percentage reduction is compared with gasoline’s GHG emissions. Considered overall emission in the fuel lifecycle (well-to-wheels)Source: IEA – International Energy Agency (2004) and Macedo, I. de C. et al. (2004). Elaboration: ICONE.

-120%

-100%

-80%

-60%

-40%

-20%

0%

Grains (US / EU)

Beet (EU)

Sugar cane (Brazil)

------3,028Exports (mn liters)

--2502,850--Imports (mn liters)

2%0.60%3.8%40%% of biofuels consumption in fossil fuels

*Sunflower: 833*Sugar beet: 7 250

*Rapeseed: 1 999*Cereals: 3 1253,0006,800Productivity (liters/hectare)

4,45890218,54717,411Biofuels production(mn liters)

*Sunflower: 1.7*Sugar beet: 66

*Rapeseed: 3.4*Cereals: 6.28.466.2Yields (t/ha)

*Sugar beet: 0.6%40% rapeseed

*Cereals: 1.6%20%48%% of feedstocks dedicated

to biofuels

*Sugar beet: 11619.7

*Cereals: 253267426Feedstocks production (mn

tons)

*Sugar beet: 2,26

*Cereals: 51,531.66.4Areas cultivated (mn

hectares)

Oil from rapeseed, sunflower, palm and

soy, animal fats, fryingoils etc.

Cereals, sugar beet, potatoes, etc.CornSugar

caneFeedstocks

1203297335Plants in operation

BiodieselEthanolEthanolEthanol

20052005/062006/07

EUUSBrazil

OUTLINE



Biofuel policies


Current situation

Perspectives

Government intervention on ethanol production, consumption and markets usually occurs in three different forms:

1. Tax exemptions in the production chain

2. Compulsory blend (mandated use)

3. Subsidies for producers and blenders

4. Import protection from lower-cost suppliers

Public Policies for Biofuels

5371486861423011

88

44

Gas

+Eth

anol

Con

sum

ptio

n(b

illion

lite

rs o

f gas

olin

e eq

uiva

lent

)Blends

10%

5%

25%

5%

10%

2%

3%

0% 5% 10% 15% 20% 25%

PhilippinesArgentinaColombiaThailand

IndiaBrazil

CanadaJapanChinaEU-27

US* 2022

2010

2010

2030

2010

2007

2007

2010

2007

3% permited

Variation range

Public Policies for Bio-ethanol

Current Goal

Mandated

Mandated in some areas

date

Biofuel consumption goal/total gas+ethanol consumption

Notes: Gas+Ethanol consumption estimates for 2006 (Brazil’s data for 2005). *US percentage blends were calculated using US gasoline consumption estimates and the 2007 Energy bill approved by the Senate (all renewable transportation fuel consumption assumed to be fulfilled by ethanol). Percentage in volume.Sources: USDA, MAPA, GTZ, FO LICHT, ÚNICA, CERA, AMI, RFA, World Watch Institute, Datagro. Elaboration: ICONE.

Ethanol for fuel ends:MFN applied import tariffs

Note: (1) ad valorem equivalent, 2004-2005 average, for non denaturized ethanol (majority of imports). (2) 2004 applied tariff for denaturized ethanol (majority of imports). (3) 2006 applied tariff for denaturized ethanol ( majority of the imports). (4) 2003 applied tariff for non denaturized ethanol for other ends (not beverage). (5) Exception from the External Mercosur tariff (TEC) of 20%. Source: WTO, Comtrade, India customs union, Secex and Eurostat. Elaboration: Icone

63.0%

40.0% 39.0%

30.0%27.2%

0.0%0%

10%

20%

30%

40%

50%

60%

70%

EU(1) China(2) US(1) India(3) Japan(4) Brazil(5)

US Ethanol: Petroleum vs Corn prices

Source: Prices obtained at PERKINS, S. European Conference of Ministers of Transport using USDA & US EIA data; cost equivalence calculation: Bear Stearns, “Ethanol 201: Beyond Corn”, 2006. Breakeven obtained at TYNER, W.E. U.S. Ethanol Policy–possibilities for the Future. Purdue University. Available at: http://www.ces.purdue.edu/bioenergy.

0

10

20

30

40

50

60

70

80

90

1.5 2.0 2.5 3.0 3.5 4.0 4.5Corn price (US$/bushel)

Petr

oleu

m p

rice

(US$

/bar

rel) 2006

2005

2004

2007

2003 2002

Breakeven

(no subsidies)

Subsidy

(US$ 0,51/gal)

The US targets for biofuels

63%167.6202256.7Corn starch ethanol

Last stages of Congress’

approval procedures

In force

n.a.n.a.202279.5Advanced biofuels

150%402.22022136.3Bill approved by the Senate2007

31%83.8201228.4Renewable Fuel Standards2005

20%54.6-18.5-Current

production

% current corn area

Tons of corn

Target year

Billion liters of ethanol

law/proposalDate

To accomplish the target*Target

Note: * based on current productivity and yields. Ethanolconsidered as the only biofuel in the achievement of the targetsSource: USDA and Governors’ Ethanol Coalition. Elaboration ICONE.

Of which:

“Advanced biofuels” are defined as “fuel derived from renewable biomass other than corn starch” (it includes cellulosic ethanol and/or sugar ethanol) .

0

2

4

6

8

10

12

14

16

72/7

373

/74

74/7

575

/76

76/7

777

/78

78/7

979

/80

80/8

181

/82

82/8

383

/84

84/8

585

/86

86/8

787

/88

88/8

989

/90

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

7e

Etha

nol p

rodu

ctio

n (b

illio

n lit

ers)

1973 Oil crisis & low sugar prices.

1975 PROÁLCOOLFIRST PHASE

Mandatory blend and subsidies.

1978-1979 PROÁLCOOL – SECOND PHASEFiscal incentives and tax exemptions for ethanol

production and E-100 fueled cars. All gas stations must obligatorily sell ethanol. Low ethanol prices

(65% of gasoline’s) guaranteed at the pump.

2003 FLEX FUELFlex fuel vehicles begin to be sold.

Brazilian Fuel Ethanol History

Source: Datagro, 2006 (dados). Elaboration: ICONE.

Anhydrous

Hydrous

GlobalMarket?

FlexFuel

Deregulation, Sugar Exports

Incentives, mandatory blends, new technologies

ETHANOL CRISIS at the end of the 80sOil prices down. Brazilian government cuts support.Higher sugar prices affect ethanol production and

sales of E-100 cars went down rapidly

Biodiesel Programs in the World

Elaboration: Abiove

USEnergy Security approachObjective is to reduce oil dependency from the Middle East

EUEnvironmental approach2.0% of biofuels in 20055.75 % of biofuels in 20108.0% of biofuels in 2020

BRAZILSocial approachObjective is to promote social inclusion by creating jobs and increased farm income

Biodiesel Excise duty in the EU (Oct 2005)

0.45

0

0.09

0.06

0

0

0

0.78

0.47

0.42

0.37

0.36

0.27

0.4

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

UK

Germany

France

Netherlands

Sweden

Spain

Italy Diesel

Biodiesel

Source: Rabobank euros/litre

Ethanol Excise duty in the EU (Oct 2005)

0.45

0

0.21

0.16

0

0

0.23

0.78

0.66

0.59

0.67

0.53

0.4

0.55

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

UK

Germany

France

Netherlands

Sweden

Spain

Italy Petrol

Bioethanol

Source: Rabobank euros/litre

OUTLINE



Biofuel policies


Current situation

Perspectives

05

101520253035404550

2000 2001 2002 2003 2004 2005 2006e

Note. E=estimates. Source: F.O. LICHT, UNICA., CARD.

Brazil

US

China

EUIndiaOthers

Bill

ion

liter

sWorld Ethanol Production

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

2001 2002 2003 2004 2005 2006e

hõe

billi

on li

ters

Note: e=estimates (US and Brazil final data for 2006, South Africa data was projected considering preliminary data for 2006, for other countries projections were made based on growth rate). Only the extra block trade was considered in the case of EU. Fonte: F. O. Licht, USITC, EUROSTAT e MDIC.

Brazil

Others

US

China

C. Rica- JamaicaSaudi Arabia

South Africa

EU

World Ethanol Exports

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

2001 2002 2003 2004 2005 2006e

billi

on li

ters

US

India

OtherKorea

Nigeria

Latin Am.

Japan

EU

Note: e=estimates (US and Brazil final data for 2006, South Africa data was projected considering preliminary data for 2006, for other countries projections were made based on growth rate). Only the extra block trade was considered in the case of EU. Fonte: F. O. Licht, USITC, EUROSTAT e MDIC.

World Ethanol Imports

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2000 2001 2002 2003 2004 2005 2006

USLatin Am.

EU

JapanKoreaNigeriaIndia

Others

High volatility of prices anddestinations (buffer)Lack of international standards

Note: Ethanol defined by NCMs 22072010 and 22071000. Source: MDIC-SECEX

Brazil – Ethanol Exports(Billion liters)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0Ja

n-99

Mar

-99

May

-99

Jul-9

9Se

p-99

Nov-

99Ja

n-00

Mar

-00

May

-00

Jul-0

0Se

p-00

Nov-

00Ja

n-01

Mar

-01

May

-01

Jul-0

1Se

p-01

Nov-

01Ja

n-02

Mar

-02

May

-02

Jul-0

2Se

p-02

Nov-

02Ja

n-03

Mar

-03

May

-03

Jul-0

3Se

p-03

Nov-

03Ja

n-04

Mar

-04

May

-04

Jul-0

4Se

p-04

Nov-

04Ja

n-05

Mar

-05

May

-05

Jul-0

5Se

p-05

Nov-

05Ja

n-06

Mar

-06

May

-06

Jul-0

6Se

p-06

billi

on li

ters

US: Fuel Ethanol and MTBE Consumption

Source: EIA. Elaboration: ICONE.

Ethanol

MTBE

MTBE banned in California, New York and Connecticut

US: Ethanol Imports

0

100

200

300

400

500

600ja

n/04

fev/

04m

ar/0

4ab

r/04

mai

/04

jun/

04ju

l/04

ago/

04se

t/04

out/0

4no

v/04

dez/

04ja

n/05

fev/

05m

ar/0

5ab

r/05

mai

/05

jun/

05ju

l/05

ago/

05se

t/05

out/0

5no

v/05

dez/

05ja

n/06

fev/

06m

ar/0

6ab

r/06

mai

/06

jun/

06ju

l/06

ago/

06se

t/06

out/0

6no

v/06

dez/

06ja

n/07

fev/

07m

ar/0

7ab

r/07

Brazil Caribbean Basin China Others

Source: USITC. Elaboration: ICONE.

Mill

ion

liter

s

2006:2.740 M liters

2005:820 M liters

2004:920 M liters

MTBE ban

2007:-

0

20

40

60

80

100

120

140

160

00/01 01/02 02/03 03/04 04/05 05/06F

World Vegetable Oil and Fats Production

China

EU-25

India

Others

Indonesia

Malaysia

ArgentinaBrazil

Million tons

Note: F = forecast. Source: Oil World 2006.

US

80

100

120

140

160

180

200

00/01 01/02 02/03 03/04 04/05 05/06F

Vegetable Oil and Fats Production Growth

China

EU-25

India

Others

Indonesia

Malaysia

Argentina

Brazil

100 = production in 00/01


US

-40

-30

-20

-10

0

10

20

30

40

00/01 01/02 02/03 03/04 04/05 05/06F

Net Vegetable Oil and Fats Trade

China

EU-25India

Others

Indonesia

Malaysia

ArgentinaBrazil

Net Importers

Net Exporters

Million tons


Source: Oil World Annual 2006.

EU-25: Vegetable Oil Imports(1999-2006)

Note: HS defining the products: Soy (150710,150790), Palm (151110,151190,151321,151329), Sunflower (151211,151219), Rape (151410,151411,151419,151490,151491,151499). The exports of a country indicated in the key may be included in “others”. Source: Eurostat.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Argentina BrazilCanada IndonesiaMalaysia RussiaUkraine USOthers

Palm Sunflower Soy Rape

Bill

ion

MT

OUTLINE



Biofuel policies


Current situation

Perspectives

BiodieselConsumption

EthanolProduction

Note: Projections based on the announced targets and capacities of each country. Source: CARD – Iowa State (Prof. Bruce Babcok for US), FAPRI, ACTI, FO Licht, UNICA, ABIOVE, TOEPFER International and ICONE.

Biofuels Projections

0

10

20

30

40

50

60

70

80

90

100

110

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0

10

20

30

40

50

60

70

80

90

100

110

120

2004 2005 2006 2007 2008 2009 2010 2011 2012

US BrazilEU-25 ArgentinaMalaysia IndonesiaChina IndiaOthers

Billion litersBillion liters

40

World Ethanol Production(Billion liters)

Fonte: CARD (Iowa State University), F.O. Licht, UNICA.. Elaboração: ICONE.Mapa elaborado com auxílio do programa Philcarto, disponível em http://perso.club-internet.fr/philgeo

17.4

35.4

0.2 0.3

3.16.0

0.3 1.9

0.2 0.21.8

3.3

0.8 0.9

3.8 5.1 0.1 0.1

0.2 0.2

2.0 2.1

0.4 0.5

0.3 0.3

0.2 0.2US Colombia

Others

Canada

Brazil

ArgentinaSouth Africa

EU-27Ukraine

Russia

China

India

Indonesia

Australia

Thailand

Japan

Legenda

2006

2012

0.42.8

0.1 0.3

Turquie

18.5

54.1

45.2

?

41

Biodiesel World Consumption(billion liters)

Nota: 5% blend in Brazil for 2012/13.Source: Toepfer International, ABIOVE, TOEPFER. Elaboration: ICONE.Mapa elaborado com auxílio do programa Philcarto, disponível em http://perso.club-internet.fr/philgeo

0.9 1.0

Outher

1.4

5.2

US

6.5

14.9

EU-27

0

2.0

Brazil

0

4.7

Argentina

0.21.5

India

0.2

4.9

Indonesia

0

5.1

China0.2

7.4

Malaysia

Legenda

2006

2012

0

5

10

15

20

25

30

35

40

200620072008200920102011201220132014201520162017201820192020

2020 2020 ProjectionsProjections: : EthanolEthanol ImportsImports ononPrincipal Principal MarketsMarkets

US

China

EUJapan

Note scenario 1: US corn to ethanol yield growing at 1.4% aa, EU targets in Volume. Scenario 2:US corn to ethanol Yield growing at1% aa, EU target in volume. Source: ICONE

Bill

onlit

ers

0

5

10

15

20

25

30

35

40

200620072008200920102011201220132014201520162017201820192020

China

US

EU

JapanIndia andCanada

India andCanada

Scenario 1 Scenario 2

0

5

10

15

20

25

30

35

40

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Brazil Preference (EU and US) Colombia

2020 2020 ProjectionsProjections: : EthanolEthanol ExportsExports bybyPrincipal Principal SuppliersSuppliers

Note scenario 1: US corn to ethanol yield growing at 1.4% aa, EU targets in Volume. Scenario 2:US corn to ethanol Yield growing at1% aa, EU target in volume. Source: ICONE

Bill

onlit

ers

0

5

10

15

20

25

30

35

40

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Brazil Preference (EU and US) Colombia

Scenario 1 Scenario 2

Impact of Tariff Reduction on US and EU Ethanol Imports

0

5

10

15

20

25

30

35

40

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

US (2023-30)47,62 billion litres

US ( 2009-16)10,56 billion litres

UE (2006-2030)56,5 billion litres

Note scenario 1. Source: ICONE

Bill

onlit

ers

EU Vegetable oils supply and demandEU Vegetable oils supply and demand

Assumptions: 5 feedstock considered (rapeseed, sunflower seed, soybeans, cotton seed and palm). All seed production assumed to be crushed. Same density assumed for all oils (1.15 kg/l ). Biodiesel consumption assumed to be 6.6% of diesel consumption (linear growth from 5.75 percent of biofuels incorporation in 2010 and 10 percent in 2020). Fixed per capita consumption of oil for other ends. Production growth based on area and yield growth projections. areat = f (arean, rotation of cultures, ∆ areat), yield= f( yieldn, ∆yieldn,s)

27.716.9Total

Consumption

13.55.5Total Net Imports

14.211.5TotalProduction

13.313.2Food and other

14.43.6Biodiesel

20122005Million liters

Select commodities: nominal prices

0

100

200

300

400

500

600

700

800ja

n/00

mai

/00

set/0

0

jan/

01

mai

/01

set/0

1

jan/

02

mai

/02

set/0

2

jan/

03

mai

/03

set/0

3

jan/

04

mai

/04

set/0

4

jan/

05

mai

/05

set/0

5

jan/

06

mai

/06

set/0

6

jan/

07

US$

/t

Soybean Oil

Soybeans

Soybean Meal Raw Sugar

Corn

Notes: Soybean Meal: CBOT-Chicago Soybean Meal Futures (first contract forward) Minimum 48 percent proteinSoybean Oil: CBOT-Chicago Soybean Oil Futures (first contract forward) exchange approved grades, US$ per metric tonneSoybeans: CBOT-U.S. soybeans, Chicago Soybean futures contract (first contract forward) No. 2 yellow and par, US$ per metric tonneRaw Sugar (NYBOT Sugar 11)Corn: CBOT-Chicago Board of TradeSource: CBOT, NYBOT, ABIOVE, IMF. Elaboration: ICONE.

0

25

50

75

100

125

150

175

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Milh

on T

on

Source: 1990-2006 USDA; 2006-2017 USDA Baseline 2016-2017. Elaboration ICONE.

Seeds, domestic and industrial consumption

Animal feed

Exports

Fuel

Corn use in the US

0

5

10

15

20

25

30

35

40

2006 2007 2008 2009 2010110

115

120

125

130

135

140Corn Soybean

0

5

10

15

20

25

30

35

40

2006 2007 2008 2009 2010200

210

220

230

240

250

260

270M Ha M Ha US$/tUS$/t

Projected prices and planted area in the US

Source: Projection presented by Prof. Bruce Babcock at the WWC Biofuel seminar (feb2007).

Ethanol has grown due to environmental pressures (green house gases emissions, MTBE substitution, 2006 Energy Policy Act) and subsidies to corn production. Energy security is a growing and very important concern, especially if oil prices remain high (imports represent 64% of oil consumption).

Costs of corn ethanol are higher than sugar cane ethanol. Gasoline taxes are low in the US (18%, compared to 44% in Brazil). Even with tax exemptions, US ethanol is not competitive. Recent growing demand is due to MTBE phasing out. Long term growth is based on the adoption of mandatory blends.

Great potential for ethanol consumption if there is an officially mandated blend. Positive perspectives after Senate Bill approval. Flex fuel cars are not the most effective way to increase ethanol consumption in the US.

US: Perspectives for Ethanol

Europe: large variety of feedstocks used in ethanol production (cereals account for the major part, followed by sugar beet and wine). Potential for ethanol production growth from sugar beet as a consequence of the 2006 sugar reform. Potential imports from ACP countries (which have duty free access to the European market). Growing concern with sustainability (pressures for production standards)Japan: 3% blend represents a consumption of 2 billion liters of ethanol. Main concern is security of supply, as Japan does not produce ethanol.China: an ethanol program was launched (potential for 4.5 billion liters per year). However, main prospects for biodiesel (diesel consumption is three times higher than gasoline).India: new stages of the ethanol program are planned (today a 5% blend is required in 9 provinces, which represent a demand of 560 million liters). National expansion is expected in the near future with a blend between 10% and 20%. Main challenge is stability in local production.

Ethanol Perspectives in Other Countries

Growing demand for vegetable oils caused by biodiesel production.

Expansion of rapeseed areas are constrained by rotational limitsreached already in most producing regions. Sunflower may have greater potential for area extension, however, yield potential is limited by water availability.

To meet the commission targets, imports will need to increase. Because EU technical norms limit the utilization of soy and palm oil blend in diesel, the majority of imports should be rapeseed/rape oil and sunflower seed/oil. The decision to import oilseeds or oil will depend on investments made to increase EU crushing capacity.

Imports of vegetable oils for food consumption will also rise to substitute the quantities of oil produced in the EU that will be dedicated to biodiesel. Great potential for soy and palm oil (developing countries).

EU: Perspectives for Biodiesel

CONCLUSIONS1. Biofuel use will expand if there is interest by consumers (ex.

Global warming) and governments (public policy).

2. Impacts on agriculture may be significant as a result of the global competition between the 4 Fs in a period of supply expansion.

3. Brazil is the country with the largest potential for biofuelexpansion mainly based on two issues: incorporation of new technologies (agricultural & industrial) and higher crop-livestock land integration.

4. Cellulosic ethanol will potentially diversify the number of producers. However, tropical developing countries will still have competitive advantages in biomass production.

seminar on biofuels study in...

Documents