Transcript Tanzanian Agricultural Exports

The Transferability of Brazilian
Knowledge and Technology
Donald Mitchell*
World Bank
*Lead Economist, Development Prospects Group
April 25, 2006
Sugar cane as an energy crop
Sugar cane produces a large amount of
biomass per hectare (80 tons)
 Cane juice can produce ethanol or sugar
 Bagasse can be burned to produce
electricity
 Molasses can be used to produce ethanol,
other alcohols and other products

Potential as energy crop depends on:
Price of sugar
 Price of energy
 Government incentives
 Environmental benefits

Co-generation seems to hold the
greatest promise
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Cane residue (bagasse) is a clean burning fuel
High pressure boilers can produce electricity from
bagasse to power sugar factory and supply
electricity to national grid
Economically viable because bagasse has almost
no other value
Reduces cost of sugar production by removing
power plant from factory
Ethanol economics
Prices of ethanol have been high and sugar
low – ideal conditions for ethanol
 But sugar prices have tripled in past two
year which changes the profitability
 Ethanol is profitable in Brazil because it is
the world’s lowest cost producer of sugar
and has large installed ethanol production
capacity

Equivalent prices of sugar, ethanol
gasoline, and crude oil
Raw Sugar
Ethanol Gasoline Crude oil
$/ton
¢/lb
$/liter
$/gallon
$/bbl
200
.09
.35
1.66
56
400
.18
.70
3.32
112
600
.27
1.05
4.97
168
Current market prices:
381
.173
1.83
61
Energy prices needed to make ethanol profitable:
.67
3.16
107
Understanding the risks

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Crude oil prices are at record highs and will likely
fall over the longer term
The global sugar market is undergoing a major
restructuring and prices may not return to previous
lows
Large investments in ethanol could become very
unprofitable
Large subsidies to ethanol production divert
resources away from more economic uses
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
Crude oil prices $/bbl
60
50
40
30
20
10
0
Crude oil prices are high because
Lack of surplus production capacity due to
many years of low prices and little incentive
to invest
 Rapid demand growth from China and other
countries
 Supply disruptions – hurricanes in US,
strikes in Nigeria, terrorist strikes in Iraq
 Uncertainty about future supplies

2014
2011
70
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
Crude oil prices $/bbl
Forecast
60
50
40
30
20
10
0
Sugar market in transition
EU policy reform could make the EU a
large net importer
 Many ACP countries will reduce exports
because of EU price cuts
 Global sugar market will be restructured
 Sugar prices may not return to previous low
levels

Sugar prices
400
US $/ton
300
200
100
0
04Jan
04Apr
04Jul
04Oct
05Jan
05Apr
05Jul
05Oct
06Jan
Sugar prices
700
600
Forecast
500
400
300
200
100
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Conclusion
Co-generation appears to be profitable and
has environmental advantages
 Ethanol production from sugar cane is not
profitable for most countries even at current
high prices
 Risk to investing in ethanol production is
that energy prices will fall and/or sugar
prices will remain high, and …

Governments could be left supporting large
ethanol industries which are unprofitable
 Resources could be diverted from more
efficient uses such as food crop or export
crop production
