Bio-ethanol a feast and famine industry?

What do the owners of a multibillion-peso bio-ethanol project do when the price of sugar is P2,000 per 50-kilo bag but the equivalent volume in bio-ethanol is only about P1,500?

Bio-ethanol uses sugar cane as main raw material. No sugar is extracted from the canes if they are used as source of fuel substitutes.

Sensibly, the owners stop producing the fossil fuel substitute and mill the canes for sugar.

This is what happened to the multibillion-peso bio-ethanol project in San Carlos City in Negros Occidental.

Management decided to suspend operating the ethanol plant in August last year because the price of the fuel was lower than the price of cane sugar. The owners of the project, including Valmayor Hermanos, used the harvest from their thousands of hectares of cane fields to produce sugar.

An official of the project said bio-ethanol could very well be a feast and famine business. But the Valmayors and the rest of the stockholders do not think so. On the contrary, they claim that bio-ethanol can save the sugar industry when prices are down and the cane planters and millers make very little profit.

"When one is bad, the other is good," a consultant of the Valmayors told Malaya Business Insight in an interview.

At present, there is an excess supply of sugar for domestic use. The price of the commodity is lower. That is the principal reason why the cane planters and millers are demanding that a part of domestic sugar be converted for export.

That is also the main reason why the ethanol plant is operating again.

Under the law, motor vehicles are supposed to use gasoline blended with as much as 10 percent bio-ethanol. The consultant explained that the bigger problem is when prices of crude oil come down to a level where ethanol becomes more expensive or is not produced at all because the price of sugar is more attractive than ethanol’s.

The situation gets even worse when prices of crude and cane sugar go up. He said the ethanol plant will not have the canes to extract bio-ethanol from.

On the other hand when prices of both materials come down, ethanol gets a better chance to expand if the government will force the use of ethanol as required by law.

The consultant said Brazil, historically the largest producer of sugar, uses 80 per cent ethanol for motor fuel but remains to be a big sugar exporter.

He pointed out that Brazil has so big a territory it can have both ethanol and sugar without one being sacrificed for the other.

The company producing bio-ethanol in San Carlos City in Negros Occidental bought San Carlos Milling not for the canes but for the modern pier which is a spitting distance from the ethanol plant.

The consultant explained that the risk of explosion of ethanol fuel is minimized when the distance from the plant to the pier is much shorter.

There is a new development in cane planting. Malaya Business Insight learned that an old sugar mill established during the administration of the late President Diosdado Macapagal has been sold together with its 150,000-hectare cane field.

Strangely, the buyer will use the land not to plant to sugarcane but to high-value crops, including lumbang, whose fruit is said to be the best substitute for diesel fuel.

It takes about 10 or so years for lumbang to bear fruits or nuts.

While the trees are young and growing, the new owner of the AID-SISA sugar mill will use the land for short-term crops such as high-value vegetables.

A representative of the new owners of the old mill pointed out that 150,000 hectares withdrawn from sugarcane will not dent sugar production. He explained that the cane planters are learning modern technology that increases production without expanding the area.

AID-SISA has been idle for around 20 years. A source in the sugar industry said that the cane planters do not want their crops delivered to the mill owned by a Chinese group.

There was a time when the sugar mills were co-owned by investors in the mills and the cane planters. There was healthy cooperation among them.

A large cane planter said troubles began when Chinese investors began buying the sugar mills. The new owners of the sugar mills do not always have the necessary size of cane fields.

There was competition among the millers for canes. Planters deliver their canes to the mill which offers the best deals.

However, there are cane planters who claim they are at the mercy of the mills.

There is no explanation as yet why AID-SISA could not lay its hands on enough canes to mill.

source: malaya