Summary
Ethanol production from feedstocks that are otherwise used for food will ultimately fail in the long run. Ethanol plants like any other refinery are built for a service life of 30 years; subsidies can not be sustained for 30 years. Sugar albeit is a much better feedstock than corn, it still will fail in the long run just by the very fact that sugar refiners and food processors can withstand sharp price increases with much more ease than an ethanol producer.
Analysis
I have watched the ethanol business grow in Brazil, the USA, Europe and the Canada and it never ceases to amaze me that people, organizations, columnists and business people fail to see the risks in using a “foodstock” for ethanol production. Yes in the early 1900’s people made ethanol to run their vehicles from corn and even sugar. But the reasoning behind that was obvious; frankly there were not enough gas stations in the country. For a farmer running out of fuel was not acceptable, so it was a matter of necessity and most people were farmers back then. Further there was not nearly the proliferation of vehicles per capita as there is now. So applying the logic of yesterday to today is an error. That could not be more evident by the fact that corn is nearly $6.00 per bushel. Clearly the investment community has seen the light, almost all proposed ethanol plants that have stated they will be using a “foodstock” as feedstock are struggling to get funded. The US government has also seen the light and is studying the ways to move from corn based ethanol production to other sources like sweet grass. Though I cannot say the US government has learned the lesson in regards to ethanol production from “foodstocks” such as corn and sugar, I can say I applaud their not moving forward on the initiative of Mr. Pete Carrothers. Mr. Carrothers should look a little further outside the box and see the great commercial opportunities available right now for ethanol production from other feedstocks. It is also clear to me that Mr. Carrothers also fails to realize the lobby groups that he should be most concerned with are not the corn producing lobby groups.
