Grain defended as viable feedstock for ethanol

Posted 5 November 09

A key speaker on the second day of the FO Licht World Ethanol conference has challenged the notion that sugar crops should be considered to be superior to feed grains for the production of ethanol.

Bernard Chaud, director of biofuels projects at Tereos, which produces fuel from sugarcane, beet and grains, said that when the value of the vegetable protein co-products is factored in, grain ethanol can be comparable to sugar crops.

Mr Chaud showed four price principles that must be met for biofuels to work. The first was that currently the pre-tax price of ethanol is higher than petrol so government support is needed.

The second was that grain and sugar prices over the long-term are decreasing because of yield improvements, while crude oil is becoming costlier. “With the current trend, agricultural feedstocks will be more competitive than crude oil before the middle of the century. People ask at what crude oil price biofuels are competitive. Some say $100 a barrel, others something else. I prefer to say they are competitive when 20 bushels of wheat or 1000 pounds of sugar is equal to the cost of a barrel.”

His third price principle was intended to show that in the long term feed cereals should be considered as competitive as sugar crops to make ethanol so long as the value of the protein compensates the difference in processing cost between the two.

Mr Chaud was challenged on a lack of consideration of co-products for sugarcane ethanol such as bagasse for energy, but replied: “Of course the energy component must be taken into consideration and that is how you can get to some very high values for the energy from sugar crops… Cereals are not just energy and there is a growing need for vegetable protein that should not be underestimated. If we go for just energy crops where would the world be?”

He argued that consistency is the best feedstock, with some years sugar crops more competitive and others cereals.

Mr Chaud continued to say that these factors – including the fourth principle that sugar and ethanol prices can be connected – will affect profitability. As each is volatile – and the cumulative effect is even greater volatility – he concluded that the industry needs long-term commitments between shareholders and suppliers and consistent government policy.
If this can be achieved, Mr Chaud was upbeat for growth, saying: “There is no way that we can supersede petrol, but I think we can double or triple production [as is needed to provide a 10% share of the overall market].”

Source: F.O. Licht’s World Ethanol & Biofuels Report

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