Selected Key Drivers Shaping the World Sugar/ Ethanol Economy Dr. - PowerPoint PPT Presentation

American Society of Sugar Beet Technologists General Session Orlando, Florida – February 25 – 28, 2009 “Selected Key Drivers Shaping the World Sugar/ Ethanol Economy” Dr. Peter Baron, Executive Director, International Sugar Organization

I nternational Sugar Organization I nternational Sugar Organization Biggest Commodity Organization Worldwide g __________________________________________________________________________________________________ Membership consists of 84 countries representing: – 83% of world sugar production – 65% of world consumption, 65% of o ld o tio – 95% of world exports, and – 40% of world imports 40% f ld i t

Selected Key Drivers Selected Key Drivers  Market fundamentals (Production/ Consumption, Trade Balance)  Diversification (ethanol production  Diversification (ethanol, production, consumption, trade)  Advancements in research and technology  Ad t i h d t h l  Policy drivers: y - WTO – Doha Round - US Farm Bill - EU Sugar Policy Reform EU S P li R f

World Sugar Balances (mln tonnes raw value) (mln tonnes, raw value) 2008/ 09 2007/ 08 Change in mln t in mln t in % in % Production 161.527 168.611 -7.084 -4.20 Consumption Cons mption 165 801 165.801 162 241 162.241 + 3 560 + 3.560 + 2 19 + 2.19 Surplus/ Deficit -4.274 + 6.370 I mport demand I t d d 49 621 49.621 45 942 45.942 + 3.673 3 673 + 7.99 7 99 Export availability 49.608 46.245 + 3.363 + 7.27 End Stocks 66.272 70.533 -4.261 -6.04 Stocks/ consumption 39.97 43.47 ration in % ti i %

World Sugar Production, World Sugar Production Consumption and I SA Prices World production, Consumption and ISA prices 170 15 165 14 160 13 155 12 ents/lb 150 11 mtrv mln m 145 145 10 10 US ce 140 9 135 8 130 7 125 125 6 6 120 5 8 9 0 1 2 3 4 5 6 7 f e 9 9 9 0 0 0 0 0 0 0 0 8 0 / / / / / / / / / / 0 7 8 9 0 1 2 3 4 5 6 / / 8 9 9 9 0 0 0 0 0 0 0 7 0 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 2 2 2 2 2 2 2 0 2 2 Production Consumption ISA price

Consumption by region Consumption by region 35 30 nes, raw value 25 1984 1989 20 1994 1999 15 15 Mln tonn 2002 2007 10 5 0 S.S. Africa N. America Eastern Middle East Western Indian Sub. Latin America Far East Europe and N. Africa Europe Percapita in kg 11.7 32.2 39.7 32.5 39.6 17.1 47.2 14.8

Comparative advantages of sugar Co pa at e ad a tages o suga crops as feedstocks __________________________________________________________ • Productivity per hectare is highest; • Production costs per unit are p lowest; • The energy balance is the most gy positive one; and • CO 2 footprint gives sugar crops p g g p 2 the best environmental credentials.

Fuel ethanol programmes Fuel ethanol programmes _____________________________ _____________________________ Established Established programmes programmes Fledgling Fledgling programmes programmes programmes programmes Planned Planned programmes programmes

Sugar and fuel ethanol Sugar and fuel ethanol • Main countries producing ethanol from sugar M i t i d i th l f cane juice: Brazil, Colombia ; • Main countries producing ethanol from sugar beets: European Union countries (France, Germany, UK, Czech Republic, Austria), Turkey • Main countries producing ethanol from sugar cane molasses: India, Thailand , Colombia

2010f 2009f World Fuel Ethanol Production 2008f Other 2007 2006 Brazil 2005 USA 2004 2003 2002 100 90 80 70 60 50 40 30 20 10 0 T R ES BLN LIT

Fuel Ethanol Production outside Fuel Ethanol Production outside Brazil and US 5 4 4 2006 2007 s 3 2008 2009F itre li ln 2 b 1 1 0 d a a a a U U n n n n d d i i i i d d E E l l a a a a a a i i n h l r n i C a t I a s h u C T A

World Sugar and Fuel Ethanol World Sugar and Fuel Ethanol Fuel Ethanol Consumption Projections Fuel Ethanol Consumption Projections ue ue t a o Co su t a o Co su pt o pt o oject o s oject o s Consumption potential: Bln litres ( source: MECAS(08)17 Consumption potential: Bln litres ( source: MECAS(08)17 – – Fuel Ethanol Trade) Fuel Ethanol Trade) Country Country 2008 2008 2008 2008 2015 2015 2015 2015 Brazil Brazil 20.0 20.0 38.0 38.0 USA USA USA USA 34 0 34 0 34.0 34.0 77 9 77 9 77.9 77.9 EU EU 3.7 3.7 12.0 12.0 Japan Japan - - 1.8 1.8 China China 1.9 1.9 4.2 4.2 I ndia I ndia 0.3 0.3 1.7 1.7 Thailand Thailand 0.4 0.4 1.1 1.1 World TOTAL World TOTAL 65.7 65.7 148.6 148.6

Ethanol blending requirements Country Blend% y Time Argentina) Peru ) E-10 2010 Uruguay ) Bolivia l E-10 2010 Brazil E-25 2007 (+ flexi) Canada E-5 2008 China China E 5 E-5 2008 2008 Colombia E-10 2008 Dominican Rep. E-7.5 authorised India India E-5 E 5 in 17 of 25 states in 17 of 25 states India E-10 2008 put on hold Indonesia E-10 2009 Jamaica a a a E-10 0 2009 00 Mexico E-5 2012 Philippines E-5 2009 Philippines Philippines E-10 E 10 2011 2011 Thailand E-20 by 2015 Vietnam E-5 2009

Ethanol import tariffs Canada Brazil China Japan EU USA 0 50 100 150 200 250 300 350 400 $ / m 3 Source: F.O. Licht Source: F.O. Licht

• Food versus biofuel issue often led by polemics • There is a general consensus that biofuels should be produced biofuels should be produced sustainably, be market-driven, and have a minimum impact on food have a minimum impact on food production

US Farm Bill 2008 - New Sugar Programme Main elements: Main elements: • Loan rate remains at 18cts/lb for 2008 crop, then incrementally increased to 18 75 cts/lb until 2012/13 increased to 18.75 cts/lb until 2012/13 • Loan rate for refined beet sugar will be increased from 22.9 cts/lb step by step to 24.09 cts/lb till 2013 • 85% guaranteed share of domestic consumption regardless of import volumes under TRQ or NAFTA – production in excess of 85% share still to be stored at producers’ expense p p • Any accumulation of excess sugar in case of high import levels (NAFTA) will be diverted to ethanol production • • TRQs for raw cane and refined sugars to be established at TRQs for raw cane and refined sugars to be established at minimum level necessary to comply with obligations under international trade agreements (WTO+ CAFTA+ Peru): 1.256 mln sho t tonnes mln short tonnes. In case of shortages domestic marketing In case of sho tages domestic ma keting allotments and TRQ can be increased.

Market I mpacts of the EU p Sugar Policy Reform _______________________________________________________ • 36% price cut • 6 million tonnes less domestic production • 6 million tonnes less domestic production • Market access increases from 1.3 to 4-5 million tonnes million tonnes • Main beneficiaries mainly ACP countries and and LDCs, LDCs, via via Economic Economic Partnership Partnership Agreements (EPAs) and Everything but Arms (EbA) scheme.

Structural changes in EU (27) sugar industry  12,000 workers laid off in rural areas  48,000 beet growers to give up production  Sugar production disappeared completely in Estonia, Ireland, Latvia and to a large part in Greece, Italy and Spain

Conclusions • Most constructive world sugar market outlook since 2005/06. • Massive long term potential for sugar M i l t t ti l f consumption growth. • Production, consumption and trade outlook Production, consumption and trade outlook for fuel ethanol world wide is very positive; despite a possible slow down in investments in sugar and ethanol projects due to the in sugar and ethanol projects due to the global financial crisis. • The EU Sugar Policy Reform is bearing fruit and showing results: little if any exports, d h i lt littl if t increasing market access up to 4 to 5 million tonnes. Beneficiaries mainly ACP and LDCs.

Thank you! Thank you!