Sugar Recovers but Will Ethanol?

By Jaylan Boyle, Contributing Reporter

RIO DE JANEIRO – The Brazilian sugar-ethanol industry, which heavily indebted itself in order to expand just before the financial crisis and subsequently suffered badly, is guardedly optimistic that the worst is over.

In Brazil, the world’s largest producer and exporter of sugar, many mills during the crisis were forced to cease operating. This however is precisely the reason that the industry is now recovering: When Brazil, along with other major sugar nations, scaled back it’s production, the world experienced a supply deficit that has driven prices up and is helping the sector to get back on it’s feet.

The Brazilian sugar crop by the end of the calendar year will in all likelihood break records, with a total expected harvest of nearly 630 million tons. This represents an increase of 10 percent on 2008 figures. Factors behind the growth are better rainfall distribution and expanded planting area, which reached 7.74 million hectares. Figures were not readily available as to exactly where new planting area was made available, a sensitive issue in Brazil as crops threaten environmentally sensitive areas of the country.

Around 45 percent of the year’s crop is to be used for sugar, with the remaining 55 percent earmarked for ethanol production, translating to around 27.8 billion gallons of raw ethanol.

The news of recovery comes as a much needed tonic to the industry and to the government’s heavy investment in ethanol, which is widely available at Brazilian fuel pumps. As the world’s largest exporter of ethanol, the government has spared no expense in aligning Brazil as a big part of the answer to the fossil fuel question. Biofuels or ‘biodiesils’ such as sugarcane ethanol have been touted for years as a viable solution: Their biggest draw being the fact that they purportedly emit when burnt in engines only the amount of carbon that they absorbed as growing crops, making them ‘carbon neutral’. Many governments in tropical countries recognized many years ago a profitable industry and invested heavily.

Doubt is mounting however as to the efficacy of ethanol as an answer to the world’s oil addiction. As representatives of the world’s major ethanol-producing countries gathered in Paris in early November, a growing chorus of concern is questioning whether ethanol may in fact not be as harmful, if not (seemingly unbelievably) more so, than the extraction and burning of fossil fuels. The main problem centers around the need for vast tracts of arable land to be mono-cropped in ethanol plantations such as cane, palm, and soy. This has led to the felling and burning of huge areas of forest in Argentina, for example, according to the website SpiegelOnline. The effects, as with many aspects of the environmental challenges that face us, are interconnected, such as the resultant depletion of topsoil.

The problems seem not to be only environmental; attendant social problems such as laborers working in near-slavery conditions have been widely reported.

This means that some nations are backing away from biofuel as a solution. Recently Germany scrapped plans to increase the percentage of ethanol at it’s fuel pumps; whether this was due to the government’s desire to retain environmental credibility or pressure from groups concerned that many cars will be rendered useless seemingly depends on which publication one reads.

Facing pressure to halt the clearing of land for sugarcane, Brazilian producers have reportedly been casting an eye west to the vast empty spaces on the African continent. Giant Brazilian industrial complex Odebrecht plans to inject US$220 million into sugar and ethanol production in Angola, which would result in the production of 30 million liters of biofuel. Odebrecht plans to create a partnership with the Angolan state-run oil firm Sonangol. After many years of civil war, the agricultural industry in Angola will certainly benefit from investment.

Whether biofuels stay in contention as a long-term direction may hinge on whether large complexes such as Odebrecht can resist the temptation to turn countries like Brazil into a giant cane field, and instead produce in countries such as Angola with available arable land that does not impinge on communities or areas of environmental sensitivity.