BP, Amyris, et al. have bet the farm (excuse the pun) on sugar based biofuels being the low cost, high production holy grail. Brazil has been an exporter of sugar-based Ethanol, whereas the US has produced much less efficient corn based ethanol for domestic consumption with our domestic market protected by both (1) a tax credit and (2) a $0.35/gal tariff on sugar based ethanol (i.e., to keep out Brazil). Beginning in Jan 2012, both the tax credit (really a much protected corn subsidy) went away (thank the efforts of budgetary concerns) and the sugar ethanol tariff expired. What was expected was for Brazil to export ethanol into US and negatively affecting the production of corn based ethanol.
But wait, the US is exporting ethanol to Brazil in January 2012. What happened?
I just learned that the low cost sugar beets in Brazil have been going up in price so much that the bizarre is happening in the markets and Brazil is importing “cheaper” corn based ethanol from the US!?!?
Conclusion: food based biofuels feedstock markets are widely unpredictable. Then again, let’s wait to see how the markets settle out over time.
