sugar as the new crude oil: feedstock considerations
TRANSCRIPT
Sugar as the New Crude Oil: Feedstock Considerations
October 18, 2012
Presentation to:
Platts 2nd Annual Renewable Chemicals Conference
Marriott West Loop
Houston, Texas 1
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Feedstock Considerations
Main feedstocks for renewable chemicals … and biorefineries in general
◊ Brazil/global: sugarcane
◊ United States: corn starch (converted to sugars)
Federal Sugar Program & land limitations are key factors behind the competitiveness of corn
Feedstock prices have risen considerably in recent years
◊ Sugar since 2009
◊ Corn since 2006
What is the status of these feedstocks, and what does the future hold?
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Key Points
Production growth over the last couple of years has been outside of Brazil
◊ India, Thailand and Russia have increased production
Heading toward a third surplus year in the world sugar market
For the 2012/13 crop year (October-September):
◊ Production:
Growth is expected in Brazil (yield rebound), Australia and China
Poor weather has adversely affected prospects in India
◊ Consumption:
Lower world prices should boost consumption growth
Asian demand has room to grow. The pace of economic growth is a key factor.
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Brazil & India Production
Brazil is forecast to increase production modestly in the crop year just begun. India may be
about to enter the downward phase of its production cycle.
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Brazil Sugar and Ethanol
Weather problems affected the start of the ongoing 2012 Center/South
sugarcane crop: Tail end of harvest is now a race against the rainy season.
◊ Insufficient rain early in calendar year 2012
◊ Wet April-June
◊ October-December weather is forecast to be generally favorable for harvesting …
but it’s still the rainy season
Yields are poor
◊ Function of insufficient replanting and less-than-ideal growing conditions
To-date, Center/South sugar and ethanol production are down sharply
◊ Sugar: -8%; Anhydrous Ethanol: -9%; Hydrous Ethanol: -13%.
Sugar and ethanol exports are correspondingly lower
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World Sugar Supply/Demand & Prices in 2012/13
Another Sizeable Surplus Forecast for 2012/13 – Third Year of Surplus in a Row
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U.S. Corn Supply and Demand (Million Bushels, Million Acres)
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2009/10 2010/11 2011/12 2012/13
USDA Informa USDA Informa
Planted Acres 86.4 88.2 91.9 91.9 96.9 96.9
Harvested Acres 79.5 81.4 84.0 84.0 87.7 87.7
Yield 164.7 152.8 147.2 147.2 122.0 122.0
Carryin 1,673 1,708 1,128 1,128 988 988
Production 13,092 12,447 12,358 12,358 10,706 10,706
Imports 8 28 28 29 75 125
Total Supply 14,774 14,182 13,514 13,515 11,769 11,819
Feed & Residual 5,125 4,793 4,562 4,563 4,150 4,200
Food/Seed/Ind 5,961 6,428 6,421 6,420 5,850 6,175
Ethanol for Fuel 4,591 5,021 5,000 5,000 4,500 4,750
Exports 1,980 1,835 1,543 1,543 1,150 1,000
Total Use 13,066 13,055 12,526 12,527 11,150 11,375
Carryout 1,708 1,128 988 988 619 444
Stocks/Use 13.1% 8.6% 7.9% 7.9% 5.6% 3.9%
Futures ($/Bu.) 3.72 6.47 6.57 7.85
Farm Price ($/Bu.) 3.55 5.18 6.22 6.22 7.10-8.50 7.55
13.1 bil. gal.
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Summary
World Sugar
◊ Crop year 2012/13 expected to be third consecutive year of surplus
◊ Longer term, Brazil has the potential for area and yield growth to supply
significantly more sugar to world market, if demand and prices are sufficient
Still, production costs for incremental area are higher than historical levels
U.S. Corn
◊ The drought-reduced 2012 crop is the overriding factor for crop year 2012/13
◊ Longer term, a return to trend yields (assuming normal weather) and much
slower growth in ethanol production should allow stocks to be replenished and
prices to ease significantly
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Thank You!
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Scott Richman
Senior Vice President, Consulting
Informa Economics, Inc.
901.766.4594