BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION
Joel Velasco
Chief Representative – North America
www.unica.com.br
1
OUTLINE
•! Brazil’s Sugarcane Industry Today
–! Diversification to weather the global crisis
•! Key Elements of Energy Security
–! Fuel + Infrastructure + Prices = Security
•! Building Biofuels Markets
–! Meeting global demand sustainably
•! A Challenge…
–! Where greater research & analysis is needed
2
3
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ABOUT UNICA
•! UNICA is the leading sugarcane industry
association, representing +100 producers and
mills in Brazil
•! Responsible for 60% of all ethanol and sugar
production in Brazil
•! Emerging as a leader in the generation of
bioelectricity already meeting 3% (and soon
10%) of Brazil’s electricity demand
•! International presence, now in Washington &
Brussels, to engage in constructive dialogue
4
SUGARCANE IS #1 RENEWABLE ENERGY SOURCE
Natural Gas
9.6%
Petroleum
36.7%
Coal
6.0%
Uranium
1.6%
Hydroelectricity
14.7%
Other biomass
12.4%
Other renewables
3.0%
Source: Ministry of Mines and Energy BEN (2008).
5
CURRENT PRODUCTION
Note: Estimates based on available data projections.
6
SUGARCANE DIVERSIFICATION
Note: Estimates based on available data projections.
7
AVERAGE PRODUCTION YIELDS
Liters per hectare
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Sugarcane
(Brazil)
Beets
(Europe)
Sugarcane
(India)
Corn
(USA)
Source: IEA – International Energy Agency (2005), USDA (2008), MTEC, MAPA, ICONE, UNICA
Cassava
(Thailand)
Wheat
(Europe)
8
NET ENERGY BALANCE
Resulting energy for every unit of fossil fuel input
10
9
8
7
6
5
4
3
2
1
0
Sugarcane
(Brazil)
Wheat
(Europe)
Source: World Watch Institute, compilation of various sources.
Beets
(Europe)
Corn
(USA)
9
AVOIDED GREENHOUSE GAS EMISSIONS
Compared with “yesterday’s” gasoline baseline
Ethanol from Grains
(US/EU)
Ethanol from Sugar Beet
(EU)
Ethanol from Sugar
Cane (Brazil)
0%
-20%
-40%
-60%
-80%
-100%
Note: Reductions represent well-to-wheel CO2-equivalent GHG emissions avoided from unit of
ethanol compared to gasoline, calculated on a life-cycle basis.
Source: IEA – International Energy Agency (May, 2004), based on a review of recent articles.
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11
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FUEL: SUGARCANE ETHANOL IN BRAZIL
Sources: NIPE-Unicamp, IBGE and CTC
12
FUEL: SUGARCANE ETHANOL IN BRAZIL
South-Central region
represents 87% of
sugarcane harvest
Sources: INPE Canasat
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INFRASTRUCTURE: FLEX FUEL CARS & DISTRIBUITON
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INFRASTRUCTURE: FLEX FUEL CARS & DISTRIBUITON
1,000
Millions of Liters
6
About 90% of new
cars sold are Flex
Fuel Vehicles
5
800
4
600
3
400
2
Accumulated Sales of
Flex-Fuel Vehicles
200
-
2003
Source: ANP & ANFAVEA
Millions of Vehicles
1,200
1
2008
0
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PRICES: CONSUMERS NEED TO SEE SAVINGS
R$ 2.85
Gasoline
Price at the Pump (R$/Liter)
R$ 2.60
R$ 2.35
R$ 2.10
R$ 1.85
R$ 1.60
Ethanol
R$ 1.35
R$ 1.10
R$ 0.85
JAN
FEB
MAR
APR
MAY
JUN
JUL
AGO
SEP
OUT
NOV
DEC
Retail Gasoline (E-25)
2.521
2.509
2.510
2.528
2.533
2.517
2.497
2.486
2.480
2.479
2.488
2.504
Retail Ethanol (E-100)
1.586
1.584
1.581
1.663
1.668
1.513
1.401
1.359
1.339
1.320
1.398
1.489
Sources: 2007 data from ANP, UNICA, Reuters.
NOTE: Note: Brazilian Gasoline has 25% ethanol content. There is no "pure" gasoline available in Brazil.
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PRICES: CONSUMERS NEED TO SEE SAVINGS
3.0
140
Petroleum
120
100
2.5
80
2.0
Gasoline (E-25)
1.5
1.0
40
Ethanol (E-100)
20
0.5
2005
Sources: IMF, IPEA, CEPEA/ESALQ, ANP
60
Oil prices (US$/barrel)
Gasoline and ethanol prices (R$/Liter)
3.5
0
2008
17
RESULT: GASOLINE IS NOW THE ALTERNATIVE FUEL
1900
Gasoline
1700
Millions of Liters
1500
1300
Ethanol
1100
900
700
500
2000
Source: ANP & UNICA
2003
2008
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RESULT: 1% OF ARABLE LAND DISPLACES 50% GASOLINE
Millions of Hectares (2007)
BRAZIL
851
%
total
land
%
arable
land
TOTAL ARABLE LAND
354.8
1. Total Crop Land
76.7
9.0%
21.6%
Soybean
20.6
2.4%
5.8%
Corn
14.0
1.6%
3.9%
Sugarcane
Sugarcane for ethanol
7.8
0.9%
2.2%
3.4
0.4%
1.0%
Orange
0.9
0.1%
0.3%
2. Pastures
172.3
20%
49%
3. Available area
105.8
12%
30%
Total arable land – (crop land + pastures)
Sources: IBGE, UNICA
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20
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WORLD FUELS PRODUCTION
Renewable energy represent less than 1%
FOSSIL
SOURCE
RENEWABLE
FUEL
FUEL
SOURCE
Gasoline
Sugar Cane
1,292 MT
1237 MT
(53.8 BGJ)
Ethanol
36 MT
Petroleum
Diesel
4,252
MT
(184.9 BGJ)
(0.96 BGJ)
Corn
702 MT
1077 MT
Wheat
628 MT
(46.1 BGJ)
LPG
391 MT
(11.9 BGJ)
Biodiesel
3.2 MT
(0.12 BGJ)
Soy
214 MT
Rapeseed
47 MT
Kerosene
92 MT
(3.9 BGJ)
Total (Energy Equiv.) =
115.7 BGJ
Palm
8 MT
1.1 BGJ
Notes: Million tons, 2005. Data for palm, gasoline, diesel, LPG and Kerosene is from 2003. BGJ = Billions of Giga Joules
Sources: FAO, Oil World, F.O. Licht, LCM, EIA. Elaboration: Icone and UNICA.
Sunflower
31 MT
Castor Seed
1.4 MT
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ETHANOL TRADE VS. PRODUCTION
Only about 10% of total production
70
10%
Billions of Liters
60
50
40
30
20
10
0
2000
2001
2002
2003
Source: FOLicht, Secex, USITC, European Comission, LMC. As prepared by UNICA
2004
2005
2006
2007
22
U.S. RENEWABLE FUELS STANDARD (RFS, gallons)
Represents about 7% of US gasoline market in 2008
40
Billions of Gallons
35
L
O
W
E
R
30
25
G
H
G
20
15
10
5
0
!
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Biomass-based Diesel
2006
2007
2008
0.50
0.65
0.80
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
Non-celulosic Advanced
0.10
0.20
0.30
0.50
0.75
1.00
1.50
2.00
2.50
3.00
3.50
3.50
3.50
4.00
0.10
0.25
0.50
1.00
1.75
3.00
4.25
5.50
7.00
8.50
10.50
13.50
16.00
12.00
12.60
13.20
13.80
14.40
15.00
15.00
15.00
15.00
15.00
15.00
15.00
15.00
Celulosic Advanced
!
Conventional Biofuels
4.00
4.70
9.00
10.50
Source: EISA of 2008, Dept of Energy, ITC; E-10 Blend Wall Limit based on EIA’s projections of gasoline consumption and do not include
bottleneck and other infrastructure concerns.
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U.S. MARKET FOR ETHANOL BLENDING (E-10)
2007
2008
SHARE OF
E-10 MARKET
75 – 100%
50 – 74%
10 – 50%
0 – 10%
Source: Hart Energy
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U.S. MARKET FOR ETHANOL BLENDING (E-10)
2007
2008
SHARE OF
E-10 MARKET
75 – 100%
50 – 74%
10 – 50%
0 – 10%
Source: Hart Energy
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MONTHLY EXPORTS TO NORTH AMERICA
140,000,000
2006
2007
2008
590 MGY
470 MGY
650 MGY*
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
JANUARY FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
2006 11,781,907 19,511,078 35,844,984 24,348,429 16,584,532 29,619,991 123,698,512 96,976,443 63,914,158 92,664,383 34,809,105 40,281,740
2007 51,864,071 31,018,239 23,948,426 40,199,519 49,094,678 35,929,933 81,845,382 71,883,705 38,371,822 19,767,472 11,127,527 15,137,438
2008 18,743,314 54,057,559 31,289,855 44,744,455 71,679,118 72,262,873 107,003,322 105,842,403 105,499,734 41,374,565
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Source: (*) Brazil’s Ministry of Trade (SECEX) though the end of September 2008 (includes direct $0.54 tariff and via CBI $0.30 dehydration charge.)
COST OF U.S. IMPORT LEVY
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
YTD
$400,000,000
$200,000,000
$0
2004
2005
2006
Source: U.S. International Trade Commission. Note: 2008 Data through the end of September.
2007
2008 *
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OUR MESSAGE
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IMPACT ON IMPORTS BASED ON POLICY CHANGES
By 2015, Brazil could exports between 1.5 to 6.5 billion gallons
20
Billions of Gallons
15
10
5
0
2009
2010
2011
2012
2013
2014
2015
Biomass-based Diesel
2006
2007
2008
0.50
0.65
0.80
1.00
1.00
1.00
1.00
Non-celulosic Advanced
0.10
0.20
0.30
0.50
0.75
1.00
1.50
0.10
0.25
0.50
1.00
1.75
3.00
Celulosic Advanced
Conventional Biofuels
4.00
4.70
9.00
10.50
12.00
12.60
13.20
13.80
14.40
15.00
Status Quo
0.66
0.44
0.75
0.98
1.41
1.45
1.45
1.62
1.78
1.80
Parity
0.80
1.50
2.70
3.26
3.33
3.64
3.95
4.00
No Tariff
0.85
2.10
3.10
4.64
5.00
5.56
6.40
6.50
Source: UNICA, EISA of 2008, Dept of Energy, ITC
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LAND USE CHANGE
Indirect effects as leakages?
Oil Prices
Financial Speculation
Currency
Foreign Policy Shift
INDIRECT EFFECTS
DIRECT EFFECTS
Emissions directly attributable to
the production of a product
Emissions that may be
forced by the use of a
product via market, policy
mediation, or otherwise
War
Weather
U.S. Policy Shift
Emergence of Technology
Socio-Political Shifts
Commodity Supply & Demand
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LAND USE CHANGE
Indirect effects as leakages?
A Latte
208 liters per cup
Lid
Water
Cup
Sugar
Milk
Energy
Wrapper
Coffee
142.8 liters
= 1 liter
32
LAND USE CHANGE
If the goal is GHG reduction, where’s the target?
USES OF ARABLE LAND
ARABLE LAND
355 M hectare
42%
Sources: IBGE 2007 Data, UNICA
Soybean
Corn
Sugarcane
Other
Pasture
Available
33
LAND USE CHANGE
Deforestation not driven by just agriculture…
35,000
30,651
30,000
Deforestation
25,000
Soybean
Sugarcane
20,000
14,309
15,000
10,498
10,000
8,389
5,000
1,857
1,299
0
1990-2006
Sources: IBGE, INPE/DETER, UNICA
2000-2006
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ABOVE & BELOW GROUND CARBON UPTAKE
3 METERS
2 METERS
1 METER
22-36
tons C/ha
5-7 years
1 METER
2 METERS
3-5
tons C/ha
3 METERS
4 METERS
Source: Polo de Biocombustivel (Weber Amaral) from various sources.
35
CANE VS. PASTURES: CARBON UPTAKE
Annual tons carbon per hectare
3-8 t C/ha
Source: Polo de Biocombustivel (Weber Amaral) from various sources.
22-36 t C/ha
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FOR FURTHER READING
New book on Sugarcane from Wageningen University
Source: http://www.wageningenacademic.com/Default.asp?pageid=58&docid=16&artdetail=sugarcane&webgroupfilter=&
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U.S. ETHANOL SPREADS
Spread with Regular Unleaded Gasoline
Source: EIA, JP Morgan
39
U.S. ETHANOL PRODUCTION VS. SPREAD
Will production continue despite negative economics?
Source: EIA, JP Morgan
40
PRODUCTIVITY OF TOP THREE CROPS
Yields continue to improve in Brazil
500
450
400
350
300
Soybean
250
Corn
200
Sugarcane
150
100
50
0
1982
2007
Note: 1) 2007 * - estimated data ; 2) Sugarcane include cane destined for ethanol production, sugar
production and other uses (animal feed, spirits, etc)
Sources: IBGE, UNICA
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FOOD AND LAND DYNAMICS
160,000
Brazil’s food production volumes
doubled in the last decade mainly
in last two decades
140,000
'000 ha and '000 ton
120,000
Food
Production
100,000
80,000
60,000
40,000
Area
20,000
0
1990
Sources: IBGE, UNICA
NOTE: Note: 1) 2008 is estimated data; 2) Grains include rice, corn, wheat, soybeans, etc.
2008
42
SUGARCANE AND LAND DYNAMICS
Area ('000 ha) Ethanol (mm liters) Sugar ('000 ton)
40,000
Brazil’s sugarcane ethanol volumes
have increased 130% and sugar
more than 350% in two decades
35,000
30,000
Sugar
25,000
Ethanol
20,000
15,000
10,000
5,000
0
Area
1990
Sources: IBGE, UNICA
2003
2008
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