USDA Report on the Economic Feasibility of Producing Ethanol from Sugar in the US
11 July 2006
A report by researchers from the US Department of Agriculture and Louisiana State University on the economic feasibility of the production of ethanol from sugar in the US has concluded that while such production could be economically viable in the short-term given the current high prices of ethanol, an expected moderation in prices could make it unprofitable for most sugar and raw sugar feedstocks by the summer of 2007.
The study assessed the production of ethanol from sugar feedstocks including (1) sugarcane juice, (2) sugar beet juice, (3) cane or beet molasses, (4) raw sugar and (5) refined sugar. Of those, only the cost of molasses was low enough to make it competitive with corn.
In general, the study found that estimated ethanol production costs using sugarcane, sugar beets, raw sugar, and refined sugar as a feedstocks are more than twice the production cost of converting corn into ethanol.
While it is more profitable to produce ethanol from corn in the United States, the price of ethanol is determined by the price of gasoline and other factors, rather than the cost of producing ethanol from corn. With recent spot market prices for ethanol near $4 per gallon, it is profitable to produce ethanol from sugarcane and sugar beets, raw sugar, and refined sugar.
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The optimal location of an ethanol processing facility is largely dependent on being in close proximity to its feedstock supply, regardless of which feedstock is being utilized. This has been proven with corn-based ethanol in the United States as well as sugar-based ethanol in Brazil. Corn-based ethanol plants in the United States are located close to large supplies of corn, primarily in the Midwest, to minimize feedstock transportation costs. Ethanol facilities utilizing sugar or molasses would be most economical if located at or near sugarcane or sugar beet processing facilities.
The authors also note that cellulosic conversion of biomass into ethanol could reduce the cost of converting sugarcane into ethanol in the future. Challenges would include development of high tonnage varieties of sugarcane as well as economical processing costs of cellulose on a commercial scale.
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It took me some time to figure out how the numbers given here matched up with other estimates I had seen or made regarding the economics of corn ethanol. Ordinarliy, I peg the cost of corn-based fuel ethanol at around $2.00 to $2.50 per gallon, which is what E85 has tended to retail at over the past year, and what CBOT ethanol trades at when not supply constrained. Here it is listed as around $1 per gallon.
One big missing element in the current estimates, it seems, is trasportation costs for the finished product, and blending costs at the fuel terminal. Ethanol cannot be put in ordinary petroleum pipelines, and I'm sure the rail or truck frieght is not cheap.
Another element is profit made on the sale of byproduct (distiller dried grains and such, used as animal feed), which I tended to ignore when thinking about ethanol inputs, for lack of good information on exactly how much byproduct was produced per gallon of ethanol and how much it tended to sell for on the open market.
The rule of thumb is that a bushel of corn makes 2.7 gallons of ethanol, and conveniently, the price of corn has lately been in the $2.50 range (at various midwestern elevators). Input price for corn alone is therefore a bit under $1 per gallon, but the sale of the byproduct seems to recoup a good $0.40+ cents of that. I'll have to do some homework to see if that makes sense.
Posted by: NBK-Boston | 11 July 2006 at 09:12 AM
Note that these numbers also exclude capital costs, which can be pretty high for a fermentation, so you have to tack on some extra cost to recover that investment. That may be one reason they're lower than you.
Posted by: Andrew | 11 July 2006 at 09:36 AM
NBK-Boston -
don't forget the fat profits to be made on the end product right now. There's a reason everyone and their grandmother are setting up an ethanol refinery right now. If biobutanol production technology were similarly advanced, no-one would be producing ethanol for fuel.
What struck me in the table quoted in the article is the substantial discrepancy between the US and EU in sugar beet production and especially, in processing costs.
The full report indicates that French sugar beets offer the highest ethanol yield per acre but also represent the highest feedstock cost per gallon (compared to US corn and Brazilian sugar cane). Presumably, the agricultural overheads are greater for beets, because they must be dug up and are more prone to rot in storage. However, that should be true regardless of geography.
Note that EU farm subsidies do not apply to food crops used as non-food agriculturals.
Posted by: Rafael Seidl | 11 July 2006 at 09:57 AM
One cost that may be high for the sugar beet is transportation costs. They must be processed immediately to make sugar, or the sugar will be converted to strach in the course of a day or two. Therefore the beets cannot be transported from europe anyway, and presumably they mean buying beet sugar from Europe. In this country beets are processed near the fields and to transport this sugar to the refineries or transport the fuel ethanol may be too expensive. What about sweet sourghum? I don't why they always leave it out, since you can grow it in many areas too dry for corn and it makes a nice molasses that can be harvested like sugarcane.
Posted by: Mike H. | 11 July 2006 at 10:39 AM
Did someone foreget sweet sorghum?
Posted by: allen Z | 11 July 2006 at 12:05 PM
It has sugar cane/beet level of ethanol (600 gallons an acre) and uses less water than corn. It is also less labor intensive than sugar beets. Energy balance (3-6+ with irrigation, even better if not irrigated) is near sugar cane, and leaves corn and sugar beets in the dust.
Posted by: allen Z | 11 July 2006 at 12:10 PM
Anyone know cost per gallon of ethanol (excluding capital costs, or with a breakdown - feedstock/processing vs. capital) for sweet sorghum?
Assume that would be net, since it provides some of its own fuel source, like sugar cane.
Thanks,
Mike Dutka
Asesor - Energia Alterna
Instituto Dominicano de Desarollo Integral
Posted by: Mike Dutka | 04 May 2007 at 10:01 AM