US Ethanol Companies Facing Competition from Brazilian Sugar Cane Producers

The United States continues to devote a growing percentage of its corn crop to ethanol production despite recent data from the United Nations showing that global food inflation hit an all-time high in December. An article from Investing Daily earlier this month argues that next year’s USDA data could reveal that half of the corn grown in the US went to ethanol production. Sugar cane producers in Brazil could soon play a larger role in ethanol production, however, taking some of the burden away from U.S. corn producers.

Jose Graziano da Silva, the new director general of the United Nations’ Food and Agriculture Organization (FAO), recently argued that the use of corn to make ethanol in the U.S. is playing a noticeable factor in raising grain prices worldwide. “We have been looking into the details of the price, and nowadays there is no doubt that the use of maize in the U.S. for biofuels affects the prices of maize all over the world,” Graziano da Silva said. Graziano da Silva argues that “food security comes first, that is the rule.” The FAO head says the organization’s current position is that cereals should not be used for biofuel production.

Ethanol production from sugar cane in Brazil accounts for only 3 % of land use, and does not currently affect the price of sugar on international markets, according to the director general of the FAO.

The Brazilian Development Bank announced earlier this month a program to finance low cost loans for farmers of sugar cane and producers of ethanol. The country is seeking to boost biofuel production in the wake of ethanol tariffs and subsidies expiring in the US.