VIII Annual ISO DATAGRO New York Sugar and Ethanol Conference: Report

September 08, 2014

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by Pamela Rockwell* (Advanced Biofuels USA) It was fitting that the VIII annual ISO DATAGRO New York Sugar and Ethanol Conference took place in the Empire Room of the Waldorf Astoria in New York City.
The event is sponsored jointly by two distinct organizations. The International Sugar Organization (ISO) offers a unique forum for sugar growers and producers to exchange ideas on an international level. DATAGRO is a top consulting company on sugar and ethanol, located in Brazil. The description for the 2014 conference, “Main Aspects of a Market under Pressure,” was appropriate as the industry faces the possibility of abrupt reversals in political, agricultural, economic and technological arenas
Economic Implications for Biodiesel and Ethanol in Brazil
Dr. Plinio Nastari, president of DATAGRO briefly outlined the problems in Brazil where political attempts to control inflation through artificially low fuel prices has had a crippling effect on ethanol and biodiesel markets. The problem has been exacerbated by poor weather conditions in the country. Many mills are going out of business since low prices make it impossible to repay current debt incurred during the earlier investment boom. Biodiesel and ethanol production in Brazil, which has been the envy of the global economy, will come to a complete halt if present policies remain in place because no new capital expenditures have been made, no new fields are being planted and no new strains or crop protection methods are being used.
Nastari began with a warning that if production stops completely, it will take approximately one and a half years to restart the engine. The fallout of the current policies is estimated to hit global markets in about two to two and a half years. These policies are due more to ignorance than to hostility, in his opinion, and they affect the petrochemical industry equally as badly. He ended on a more positive note, citing hope for new policies with upcoming elections and “signs of recovery” after this long period of distress. For example, by 2020, 20-30% of the jet fuel for the US Navy’s flexible fleet is slated to come from ethanol, although reaching this goal may be a problem unless the issue is addressed now. And, world demand for sugar is rising at two percent per year.
II.        Asia Will Continue to Drive the Sugar Market
Introduced as the “Two Johnnies,” Jonathan Drake, COO, RCMA Sugar, Amsterdam, Netherlands addressed consumption of sugar, followed by Jonathan Kingsman, Director of Platts Kingsman, Lausanne, Switzerland, who addressed production. Drake said sugar markets are and will continue to be driven by Asia due partially to population growth but more so by urbanization and economic growth which bring an appetite for more refined foods. He noted that some Asian countries, such as China can grow their own sugar, but others like Indonesia and Bangladesh cannot. Bangladesh currently has the fastest growth rate for sugar consumption. India and Thailand may be more likely to supply Asia than Europe, due to proximity. Depending upon weather conditions, all of them may still fall short of Asia’s demand.
Kingsman emphasized that Asia currently gets a large fraction of its sugar from Brazil but this may be about to change. Possibilities include Asia growing its own sugar; India and Thailand stepping up to fill the hole created by Brazil; Asia turning to Europe for sugar and Brazil regaining its prime export position. He tentatively concluded that the weather may determine who satisfies Asia’s sugar appetite in the near future.
Jeremy Austin, Commercial Director, Sucden, Brazil, stated that 50% of the world sugar trade is in Asia, and the rest of the world makes up the balance.
Dr. Leonardo Bichara Rocha, Senior Economist of ISO elaborated on the European possibility of supplying Asia’s sugar need. He said that quotas that presently cap production and abolish minimum prices for sugar beets in Europe are set to expire in 2017. It is possible that Germany and France will dramatically increase output at that time, changing Europe from a net importer to a net exporter of sugar.
Most of the speakers at the conference expressed hope for a change in the Brazilian economic policy in the coming political elections. Rocha confirmed that investment banks are currently in talks with sugar mills about restructuring debt and possible new investments. He mentioned that the Big Six are expected to step up investment in Africa and Asia to avert the crisis. (Bayer, Syngenta, BASF, Dow, Monsanto, DuPont) The threat of high fructose corn syrup, also known as isoglucose, costs 20% less than sugar and may further depress sugar prices.
Humberto Jasso Torres, Director General, Camara Nacional de las Industrias Azucarera y Alcoholera, in Mexico confirmed that Mexico’s situation is similar to Brazil’s, in terms of political and economic problems. Unlike Brazil, Mexico is emphasizing the production of ethanol from sugarcane. Helder Gosling, Commercial Executive Director, São Martinho, Brazil made similar estimates to earlier speakers as to when the world market is likely to feel the impact of stagnant investments and that weather (drought, El Nino), political and economic conditions, will all affect the actual date. The investment shortage is primarily in green fields. He stated that investment in refineries continues at present but if production grinds to a complete stop, it will take one to one and a half years to restart the entire process.
III.             New Technologies
Second generation (cellulosic) biofuel technologies, that eliminate the food/ fuel dilemma are set to scale up, according to Marcio Farah, Marketing Director, FMC, Brazil, the current stagnation is due to lack of funding not only for second generation fuels but also for new strains of sugarcane and new biological crop protection methods. The scale up of second gen fuels is particularly important in Brazil because, in contrast to first generation feed stocks like sugar beets, second gen feedstock (bagasse) is already at the processing site, and requires no transportation costs.
Farah confirmed that new research at FMC and other companies is being driven by customers demanding more sustainable practices. Agriculture has a huge water requirement and decreasing the cost associated with it is a prime target in Brazil. He said development of more productive strains is presently underway as well as more drought-resistant strains including genetically modified organisms (GMOs). The last new strains were developed around 2000 and the climate has changed noticeably since then. New research into more sustainable and better crop protection is also taking place since the weed profile has also changed markedly in the last several years. Biological and physical crop protection methods are gearing up in response to demands from many market segments for safer methods to protect crops from disease and weather. In addition, there is currently a huge market opportunity for investment in more efficient harvesting and processing equipment. All of these technologies will serve to lower the cost of the final product and therefore increase profit margins. Cogeneration (of heat and power (CHP)), is also seen as part of a viable solution.
IV.             New Economic Policies
Revision of RFS and LCSF as a driver
Tim Olsen, Manager of the Transportation Office of California’s Energy Commission discussed the Low Carbon Fuel Standard (LCFS) of California and whether or not it would be a safe haven for biofuels amidst the current crisis. He noted that California would have the eighth or ninth largest national economy in the world if it were a country and it consumes 11% of transportation fuel in the US. With diesel prices rising and natural gas prices falling due to fracking, he anticipates a fuel price advantage for non-traditional fuels, like natural gas compared to diesel of one dollar to one dollar fifty for the next 5-10 years.
He confirmed that approximately 28 % of greenhouse gas emissions (GHG) come from the transportation sector, and that cellulosic ethanol has a much better GHG profile. Cellulosic ethanol looks promising since the 2020 Biofuel Supply scenario states that 20% of our fuel should come from non-petroleum sources by 2020.
California is presently half way to this target. This standard will likely require the US to import biodiesel and bio methane making Brazil increasingly more important to California. He concluded by stating that we will need biofuels as a critical bridge until roughly 2030, by which time electric cars are predicted to be cost-competitive, and that by 2020, the US may be only be getting 80 % of its fuel from petroleum. (This would be down from our current use of nearer to 90%.) Even so, we will still be 80% dependent upon fossil fuel at that time.
Bob Dinneen, President and CEO of the Renewable Fuels Association, USA, spoke about the renewable fuels standard (RFS) and that targets for the RFS are expected to be revised upward compared to the proposed decrease in renewable fuels obligations. He expects they will be at least as high as the 2013 level. He firmly believes that the EPA should not allow consumption to dictate demand, since that would let oil companies dictate the amount available to the public by controlling the access to pumps that dispense E15, raising fears of misfueling reminiscent of the unleaded/ leaded gas pumps controversy of many years ago. He emphasized that despite the undermining by the petroleum industry, the RFS is the single most successful renewable fuel program that has ever existed, but people will be reluctant to invest money in it if the government doesn’t back it.
Dinneen continued that the ethanol market is growing and will continue to grow in the US. See:https://advancedbiofuelsusa.info/tag/renewable-volume-obligation-rvo.He asserted that the API (American Petroleum Institute) definitely wants the public to believe that biofuels will increase food prices due to completion (but this is not true for second gen biofuels), and that ethanol cannot be safely piped in the existing pipelines, although it has been in Brazil for many years.
Furthermore, the API hopes to keep E10 in a “box” where it cannot grow. They have ignored that ethanol can be used effectively as an octane enhancer that can be used by the smaller, more efficient engines that are being built today, and they are a real substitute for aromatics in gasoline. A recent study can be found: https://advancedbiofuelsusa.info/new-white-paper-warns-of-gasolines-growing-health-risks.
Putting up new infrastructure in terms of fuel pumps that handle blended fuel is not in the self interest of oil companies and we should recognize this outright.
V.                New Economic Policies
Norberto Zaiet, Vice President of Business, Banco Pine, Brazil, spoke about the risk perception of sugar and ethanol investment, noting that 44 mills have shut down in Brazil since 2010. Politics aside, investors need to roll over the heavy debt of many Brazilian companies which will allow them to remain in business. A price above 20 cents/pound is required for profitability. Current investments made in Brazil are expected to pay off in 2015-2017. The sector needs a “fresh round of equity” that will bring protection to the balance sheet.
VI.             Business-Oriented Research Needs
Lastly, Timothy Murray, a representative from the International Society of Sugarcane Technologists in Australia, boldly stated an obvious fact: The technical professionals do not attend the ISO DATA GRO conference nor do the investment bankers and business analysts attend technical meetings on sugar issues. He pointed out that the problems are too large for any one group to solve, and that people tend to solve problems they can solve more than problems that need to be solved.
This reminded me of a classic story, sometimes referred to as "The Streetlight Effect.” There are several versions. Here’s one: A policeman, passing by sees a drunken man on his hands and knees under a streetlight, looking for his car keys. The officer attempts to assist him but after a few minutes searching with no success, he asks the drunken man to point out exactly where the keys were dropped. Much to the officer’s surprise the drunken man points to a dark corner. When the irritated officer asked why they were looking under the streetlight if the keys were not dropped there, the inebriated man emphatically answered that it was too dark over there to find anything!
Murray suggested that the institutions attending the 2014 ISO DATAGRO conference submit a list of topics they felt important enough to fund and that technical groups in his organization would then agree on a subset to investigate. Any companies interested in having access to the data found on a specific topic would then pay a predetermined fee for access to the results.

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At the end of the day, I wondered why China is not committed to growing its own sugar, given the Brazilian situation; why none of the speakers mentioned the increasing evidence of sugar as a major cause of diabetes and other chronic illnesses; and how the health issues surrounding sugar might further drive Europe to be a net exporter. Sadly, I reflected that perhaps the health issues were not discussed, because they were not deemed to have any effect on global sugar consumption.
As the conference closed, attendees took a break before returning for the prestigious annual New York Sugar Dinner. The sunshine and fresh breezes brought a sense of reality back. As we walked outside, we watched the remnants of a police escort for President Obama that had recently shutdown Park Avenue. He was in town to dedicate the museum commemorating the 9/11 attacks on the World Trade Center. Former New York City Mayor Mike Bloomberg was one of the hosts the museum dedication. The shutting down of Park Avenue and Bloomberg’s involvement in the commemoration juxtaposed to the threatened shutdown of the sugar industry and Bloomberg News coverage of ISODATAGRO underscored for me the interconnections of our modern world.
A hero-known by his red bandana from the 9/11 attacks was recently identified by his mother as Welles Crowther. He was honored at the museum’s dedication. It made me think that the biobased fuels movement was similar to the red bandana- hero – albeit an unsung hero for the sugar industry.

* Pamela Rockwell, a Pennsylvania-based scientist specializing in formulation and evaluation of biomaterials, volunteers on STEM-related educational projects with Advanced Biofuels USA.