Is the oil and gas industry shaking? Maybe not, but Iowa corn growers could be doing so after billionaire investor George Soros last week called on the US and Europe to drop tariffs on imports of Brazilian ethanol. Indeed, Soros said major investment to ramp up Brazil’s ethanol production is at risk unless the US and Europe cut tariffs on imported ethanol.
“Unless the markets of the world are opened up, you probably have too much production coming on line,” Soros said at Brazil’s premier annual gathering of ethanol producers.
It’s no surprise that Soros would say such things, given the fact that he has joined Brazilian investors in a $900 million plan to buy sugarcane land and build ethanol distilleries in western Brazil.
High tariffs
That’s why he’s concerned about the US, which levies a 54¢/gal tariff on Brazilian ethanol, while the European Union places a €0.19/l. tariff on the stuff-nearly four times as high.
That’s also why Soros is concerned about a potential glut on the market, especially as Brazil is harvesting a sugarcane crop that is estimated to produce a record 5.3 billion gal of ethanol. As a result, Brazil this year is expected to equal or surpass last year’s ethanol export record of 898 million gal.
Soros is not alone in seeking reduced tariffs for Brazil’s ethanol. Last month, Sweden announced plans to pressure the regulatory arm of the EU to eliminate its import tariff on Brazilian ethanol, according to a report in Brazil’s Valor Economico newspaper.
According to the Swedish National Board of Trade, Brazilian ethanol is competitive with world oil prices at €22($29.87)/bbl, compared to US corn-based ethanol which is competitive at €34($46.16)/bbl of oil. Swedish grain-based ethanol is only competitive with world oil prices at around €76($103.19)/bbl of oil, Valor reported. Of course, a Brazilian newspaper would probably highlight such remarks, wouldn’t it?
Chop, chop
We wonder how much support either Soros or Valor would give to a recent study conducted in Japan on the production of ethanol from a variety of feedstocks-not just sugar.
A research team at the Tokyo University of Agriculture and Technology has developed an easy way to dissolve cellulose, the fibrous component of plants that is present in vast quantities but notoriously difficult to dissolve. The team’s success promises to make it much easier to utilize wood scrap, weeds, and other forms of biomass as raw materials for the synthesis of ethanol.
We like the idea of a diversified feedstock for ethanol, instead of the more restricted source of supply that Soros and the Brazilians are calling for. We believe in a diversified approach, and we especially like the fact that the Japanese research group will next work to develop an ionic liquid that can dissolve solid substances like disposable chopsticks.
