THE ECONOMIC FEASIBILITY OF ETHANOL PRODUCTION FROM SUGAR IN THE UNITED STATES USDA report released July 2006

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THE ECONOMIC FEASIBILITY OF ETHANOL PRODUCTION
FROM SUGAR IN THE UNITED STATESUSDA report
released July 2006
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Study Outline

• The U.S. Ethanol Industry
• Price Outlook for Ethanol
• Feedstock Available for Production of Ethanol
• Byproducts of Ethanol and Sugar Industries
• Starch and Sugar Content of Grains and Sugar
  Crops
• Feedstock Production Costs, Net Feedstock Costs
  Processing Costs
• Costs in Other Countries
• Capital Costs
• Other Issues Plant Location New Technologies
  Market Outlook for Sugar

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Feedstocks Available for Ethanol Production

• Sugarcane
• Sugar beets
• Sugarcane or sugar beet molasses
• Raw sugar (domestic and imports)
• Refined sugar

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Byproducts of Ethanol Production

• Corn
• DDGs, CGF, CGM, corn oil, CO2
• Sugarcane
• Electricity, CO2, bagasse, vinasse
• Sugar beets
• Beet pulp, CO2, vinasse
• Molasses
• CO2, vinasse
• Raw and refined sugar
• CO2, vinasse

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Production Process Overview
Corn (dry mill) Sugarcane
Grind add H2O to create mash Grind to extract sugar juice
Add enzymes heat to create sugar juice
Add yeast ferment Add yeast ferment
Distill out ethanol Distill out ethanol
Bagasse
CO2
CO2
Vinasse
DDGs
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Ethanol per ton of Feedstock
Gallons
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Feedstock Costs

• /gal
• Corn (dry mill) 1/ 0.53
• Corn (wet mill) 1/ 0.40
• Sugarcane 1.48
• Sugar beets 1.58
• Molasses 0.91
• Raw sugar 3.12
• Refined sugar 3.61
• Brazil sugarcane 0.30
• 1/ Net of byproduct credits
• Data are 2003-05 except sugarcane and sugar
  beets, 2003-04, and Brazil is for 2004 from F.O.
  Licht

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Processing Costs

• Sugarcane
• Adjusted processing cost of sugarcane to raw
  sugar (2003-05 average)
• Sugar beets
• Adjusted processing cost of sugar beets to beet
  sugar (2003-05 average)
• Molasses, raw and refined sugar
• Adjusted processing cost of corn to ethanol
  (2003-05 average)

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Processing Cost Adjustments

• Sugarcane sugar beets compared with corn
• Reductions due to energy, enzymes increases due
  to transportation, maintenance, labor
• Molasses, raw and refined sugar compared with
  corn
• Reductions due to energy, enzymes

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Estimated Ethanol Production Costs (/gal)
Net feedstk Processing Total
Corn (dry mill) 0.53 1/ 0.52 1.03
Corn (wet mill) 0.40 1/ 0.63 1.05
Sugarcane 1.48 0.92 2.40
Sugar beets 1.58 0.77 2.35
Molasses 0.91 0.36 1.27
Raw sugar 3.12 0.36 3.48
Refined sugar 3.61 0.36 3.97
Brazil sugarcane 0.30 0.51 0.81
1/ Net of byproduct credits Processing costs are
2003-05, except Brazil, 2004 based on F.O. Licht
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Ethanol and Gasoline Prices
1/99-5/06 ethanol averaged 0.50 premium
5/06 ethanol is 0.94 premium
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May Spot and Futures Prices during the week of
July 3NYMEX gasoline, CBOT ethanol
/gal
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Sugarcane Sugar Beet Ethanol Economic
Advantages Not Considered in Cost Estimates

• Sugarcane ethanol is a green renewable fuel and
  could be eligible for 2.5 credits per gallon
  under the renewable fuels standard (RFS)
• Byproducts may offset costs more than assumed
• Electricity produced by burning bagasse is green
  renewable electricity and could be eligible for
  1.9 cents per kwh credit (closed loop) or half
  that under (open loop)

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Sugar Yield per Acre, 2002-2004
Tons/ac
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Conclusions

• Molasses competitive with cornbut supply issues
  exist
• While production costs for other sugar feedstocks
  are more than twice that for corn, production is
  feasible if ethanol price are high enough
• Current ethanol futures price (MERC) for 1/2007
  deliver is 2.50/gal. (buyer pays freight from
  Chicago)
• Suggests sugarcane and sugar beet ethanol return
  would drop to breakeven or less by then,
  excluding capital costs
• Report addresses efficient plant location,
  capital costs and new technologies
• Results of the study are uncertain, given
  volatile and uncertain global oil markets, no
  sugar-to-ethanol plants in the U.S., and
  uncertain relationship between ethanol and
  gasoline prices in the longer run