How important is sugar in the global ethanol equation? (and vice-versa) Kingsman Indian Sugar Summit Tom McNeill 1 September 2010
Global sugar/ethanol picture Sugar Other Ethanol Sugar in 2010/11 crowding out ethanol prodn Global sugar prices out-compete Braz ethanol Oil prices are only soft support for ethanol Grain price rally pushing feedstock prices up Globally, mandated or price supported is fine Non-mandated usage more difficult
Global Ethanol S&D 2010
Global Ethanol Prodn has grown faster than consumption, causing a surplus 90 80 70 60 50 40 30 20 10 mln litres World ethanol production and consumption 2007 2008 2009 2010 Our latest forecasts: Prodn: 85.48 bln l. Consn: 83.50 bln l. 0 Production Consumption
Our forecast shows strong regional imbalance 4 3 bln litres Regional Fuel Ethanol Surplus/Deficit 2009 2010 2 1 0-1 -2 Europe N America C & S America Africa Asia & Middle East
Brazil Ethanol where the real sugar interface lies
Brazil major producer & exporter, using sugar cane 30 25 20 15 10 5 0 CS Brazil - ethanol production by type bln litres Hydrous Anhydrous 98/99 00/01 02/03 04/05 06/07 08/09 10/11f Prodn: 26.8 bln l 31.35% of global Cons: 23.4 bln l 28.02% of global Surplus: 3.4 bln l Compared to 1.98 bln l global
Brazil while ethanol prodn is well ahead of 2009/10 2.4 2.0 bln litres CS Brazil - Fortnightly Ethanol Production Hydrous 09/10 Anhydrous 09/10 Hydrous 10/11 Anhdyrous 10/11 1.6 1.2 0.8 0.4 0.0
Brazil sugar reduces potential ethanol production 75% 70% 65% 60% CS Brazil - Cumulative Prodn Mix Percentage of Cane to Ethanol 06/07 07/08 08/09 09/10 10/11 65% 60% 55% 50% CS Brazil - Ethanol & Sugar Split and Utilisation % ART mln mt Ethanol sucrose utilisation Sugar sucrose utilisation Sugar % Ethanol % 90 80 70 60 50 40 55% 50% 45% 40% 30 20 10 45% 35% 0 Mid Apr Mid May Mid Jun Mid Jul Mid Aug Mid Sep Mid Oct Mid Nov Mid Dec Mid Jan
Unsurprising, since sugar price more attractive 30 25 US c/lb Brazil Ethanol v Sugar Export Price (US c/lb Equiv.) Hydrous ESALQ Anhydrous ESALQ Sugar Export Value 20 15 10 5 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10
Brazil Consumption is recovering slowly after a dip Brazil: Alcohol Consumption as Fuel 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 bln litres/mth Hydrous Anhydrous 0.00 Jan 07 Jun 07 Nov 07 Apr 08 Sep 08 Feb 09 Jul 09 Dec 09 May 10
Brazil - Despite export availability, prices not competitive in US/EU 850 $/cu m Comparative Spot Ethanol Prices 750 650 550 FOB Santos FOB Rdam T1 FOB NY Harbour 450 350 250 Nov 08 Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10
Brazil As a result, reduced exports in 2010 700 600 500 400 300 200 100 mln litres Brazil Ethanol Exports (Williams data) 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2008 2009 2010
Brazil Export window to Europe remains shut EN Spec Prices at Origin & Destination Brazil Ethanol Exports to Europe 850 800 750 700 650 600 550 500 450 400 350 $/cu m Margin (RHS) FOB Rdam T1 FOB Santos $/cu m 150 100 50 0-50 -100 1,750 1,500 1,250 1,000 750 500 250 cumulative mln litres 2007 2008 2009 2010 (Williams data) 300-150 0 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Brazil Looking forward, more cane available 700 600 500 400 300 200 100 0 mln mt CS Brazil Cane Production Question is in 2011, will there be more cane? More sugar? More ethanol?
Hydrous price highest ever at end Aug timing 1,400 Brazil ESALQ Hydrous Index Price R$ per cu metre 1,200 1,000 800 600 400 2005/06 2006/07 2007/08 2008/09 2009/10 '2010/11 200 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Brazil - summary Ethanol playing catch-up from 2009/10 (so is sugar) Plenty of unmet ethanol demand in 2010 Domestic prices > export, record Aug highs Exports of fuel ethanol have suffered
Global Ethanol not all smooth sailing
Global Ethanol Feedstock prices on the rise 200 GBP/mt London Prompt Feed Wheat 850 CBOT Prompt Corn Futures Price US /bu 180 750 160 650 140 550 450 120 350 100 250 80 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 150 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10
Global Ethanol Feedstock prices on the rise (2) 220 200 EU - Ethanol Feedstock Prices EUR/mt Corn Wheat 45 40 35 Consecana cane price vs NY11 R$/t cane Cane Price NY11 Sugar USc/lb 30 25 180 30 20 160 25 20 15 140 15 10 120 10 5 5 100 0 0 Jun 10 Jul 10 Aug 10 00 01 02 03 04 05 06 07 08 09 10
Global Ethanol Feedstock prices on the rise (3) 700 Thailand - Cassava Exports Price $/mt 200 USD /mt FOB Thai Molasses Prices 600 180 500 160 400 140 120 300 100 200 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 80
Commodity Price hike doesn t include oil 160 140 120 100 80 60 40 20 $/bbl WTI Oil Prices 0 05 06 07 08 09 10 Oil price probably insufficient to push new ethanol schemes
Global Ethanol where does sugar fit?
Other Major Producers (except Brazil) World Grain, Sugar cane, Sugar beet, Molasses, Cassava USA - Corn EU - Corn, Wheat, Sugar Beet China Corn, Cassava Canada Corn, Wheat Thailand Cassava, Molasses Australia Wheat residue, Molasses, other grains
Global Prodn Corn & Sugarcane the major feedstocks Other Grain, 2367, 3% World - Ethanol Production by Sugar Beet, 938, 1% Feedstock Molasses, 1775, 2% Cassava, 235, 0.27% Others, 1112, 1% Sugarcane, 26975, 32% Corn, 52079, 61% mln litre
Global Exports Sugarcane the major feedstock (2010) Sugar Beet, 234, 7% World - Ethanol Exports by Others, 214, 6% Feedstock Molasses, 224, 4% Cassava, 45, 1% Other Grain, 455, 13% Sugarcane, 1450, 42% Corn, 828, 24% mln litre
US Strong growth of ethanol production relies on mandates, gasoline price & corn price US Ethanol Operating & Listed Capacity US Ethanol Producer's Return on Capital 17.5 15 bln gal Total Listed Capacity Operating Capacity 0.75 $/gal (Dry Milling) c/bu 450 12.5 0.50 400 10 7.5 0.25 350 5 0.00 300 2.5 0 Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Return on Capital (LHS) Corn Price -0.25 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 250
EU Crush Margin falling due to rising feedstock cost European Ethanol & Wheat Crush Margin 400 EUR/mt 300 200 100 0-100 -200-300
EU beet feedstock the exception to rule? 36 UK - Beet price ( /mt) 34 32 30 28 26 24 22 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
China Corn is still the main feedstock 5,000 4,000 000 mt Chinese Ethanol Production 2006 2007 2008 2009 China - Ethanol Production by Feedstock Molasses Ethanol 6% 3,000 2,000 Cassava Ethanol 19% 1,000 0 Corn Ethanol Cassava Ethanol Molasses Ethanol Corn Ethanol 75%
China despite this, a small increase in exports 35 30 25 20 mln litre Chinese Ethanol Exports 2008 2009 2010 15 10 5 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Canada Corn accounts for over 70% of feedstock in ethanol 2000 mln litres Canada - Ethanol Production & Consumption Production Consumption Canada - Ethanol Capacity by Feedstock mln litre 1600 1200 800 400 Wheat 382 27% Corn 1026 72.51% Others 7 0.49% 0 2007 2008 2009 2010
Thailand making more ethanol from molasses 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 litres/day Thai Ethanol Costs of Production baht/litre Quantity Cassava Quantity Molasses Mol. Ethanol COP Cass. Ethanol COP 35 32.5 30 27.5 25 22.5 20 17.5 0.00 Aug 09 Oct 09 Dec 09 Feb 10 Apr 10 Jun 10 Aug 10 source: Thai Energy 15
Australia tiny market, but dominated by wheat residue & molasses 3.00% Australia: Sales of Ethanol Blended Petroleum Three Ethanol Producers 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 VIC NSW QLD Australia Feedstocks Capacity (mln litres/yr) wheat 150 molasses 60 sorghum 90
Global sugar/ethanol picture Sugar Other Ethanol Sugar in 2010/11 crowding out ethanol prodn Global sugar prices out-compete Brazil ethanol Oil prices are only soft support for ethanol Grain price rally pushing feedstock prices up Globally, mandated or price supported is fine Non-mandated usage more difficult
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