Brazil to double, triple sugarcane hectarage

Earlier, the president of Sao Paulo's 'Cane Agroindustry Union' outlined his projections for the Brazilian ethanol market, estimating that by 2014 the country will have doubled its output of the renewable fuel. With US$ 10 billion planned for investment in 92 new sugar mills and ethanol plants, the land base would have to expand considerably from its current hectarage of 5,5 million hectares.

Today, Luis Guedes, Brazil's agriculture minister, focused on the issue during an international biofuels conference in Brasilia and announced the country can double or even triple the land devoted to sugar cane in the next few years. Guedes is betting that the advantages of cane over corn as a feedstock for ethanol will keep it a leader in the nascent global biofuels market.

The country's current cane plantations use slightly less than 1% of Brazil's arable land base. The main production zones can be found in Central and Southern states, with one state, Sao Paulo, producing around 50% of the country's entire sugar output. The other major growing area can be found in the poorer and more arid Nordeste region (click map to enlarge):
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Brazil has become a leader in the ethanol boom in recent years after developing cars that run on the fuel, a plant-derived gasoline substitute that can be made most efficiently -- in terms of production costs -- from sugar cane. Current ethanol production nears 17 billion liters and exports more than tripled in two years, hitting 2.6 billion liters in 2005, as other countries saw the appeal of the green fuel. Today Brazil sells ethanol to Asia, Europe and North America, but prices are volatile because demand is still erratic and a proper futures market has not yet developed for hedging. "Our proposal is that other countries start producing ethanol," says Guedes. "To become a commodity, we have to have several suppliers in the global market."

In fact, the United States is now the world's biggest ethanol producer but it is not expected to export and will likely continue to import the fuel. The United States is the leading destination for Brazilian ethanol exports. U.S. ethanol is almost entirely from corn, which is costlier because it demands more water, area, fertilizer and energy to grow.

Critics of the U.S. renewable fuels program point out that corn ethanol produces only about 1.5 times the energy it takes to grow versus about 8.3 times for cane ethanol.

Cane mills say that Brazilian ethanol, which is subsidy-free, is competitive with gasoline prices as long as world oil remains above about $30 to $35 a barrel, whereas U.S. ethanol production from corn is even now heavily dependent on a 51 cents-a-gallon federal tax credit and enjoys hundreds of subsidies (earlier post).

Currently, the agriculture ministry estimates Brazil needs to plant 3 million more hectares with sugar cane -- far below Guedes' estimate -- to meet foreign and domestic demand in 2013. At present, Brazil produces 450 million tonnes of cane on 6 million hectares.

Some environmentalists have criticized Brazil's fast growing ethanol program, saying cane crop expansion could threaten rainforest. But Guedes said Brazil could double the area planted without cutting down any trees if it used only degraded pastureland and already deforested areas.

Brazilian ethanol is currently produced in a way researchers deem to be 'sustainable'. A recent assessment by the International Energy Agency's Bioenergy Task 40 compared the ethanol production process to sustainability criteria drawn up by the Dutch government (the only government in the world to have created such specific criteria), and concluded that on most of the criteria, Brazil's fuel scores well (earlier post).