For years, countries have demonstrated the economical production of ethanol from sugarcane, most notably Brazil. Some countries produce and process so much cane within their own borders, while heavily protecting their own markets, that these producers aren’t as vulnerable to the global sugar trade as U.S. growers have been. The United States implements protective tariffs, too—the Sugar Program passed in the 2002 Farm Bill is unlike any other agricultural subsidy program on the books—to force competitiveness in the growing and processing of domestic sugar beets and cane.

In July 2006, the USDA published “The Economic Feasibility of Ethanol Production from Sugar in the United States.” The report states the average cost to produce ethanol in dollars-per-gallon units (including feedstock and processing costs) from sugarcane in Brazil is 81 cents, excluding necessary capital costs. This is compared to U.S. ethanol production via dry milling of corn, which weighs in at $1.05, with an approximate 50/50 split between corn procurement and processing costs. To produce ethanol from sugar beets or sugarcane in the United States, in markets assumed to be relatively constant, the USDA reports one would pay the per-gallon price tags of $2.35 and $2.40, respectively.

Capital investments to build U.S. sugar-to-ethanol processing facilities are much higher than that of corn, too. “Estimates of capital expenditure costs to construct facilities to utilize sugarcane or sugar beets to produce ethanol would be expected to be higher than capital costs for corn-based ethanol plants, primarily due to higher feedstock preparation costs,” the government report states. “A [20 MMgy] ethanol plant using sugarcane or sugar beets as feedstock would be expected to have capital expenditure costs in the range of $2.10 to $2.20 per gallon of annual capacity, compared with an estimate of $1.50 per gallon of annual capacity for a corn-based facility.”

According to Kevin Hicks, research leader in crop conversion science and engineering with USDA’s Agricultural Research Service, it’s easier to make ethanol from sugar than from the starch in grains, even though the capital costs per gallon of construction, feedstock and processing costs are all higher than what’s needed to make corn-ethanol. “The starch [in grains] has to be broken down to sugars before the yeast can ferment it,” Hicks says. “With sugarcane and beet, the primary carbohydrate present is sucrose, which yeast can ferment directly, making the process simpler than with starch-based grains.”

Even though it’s simpler to make ethanol from sugar, the costs are high and apparently prohibitive. Therefore, with domestic sugar-producer lobbyists trying to keep policies status quo—the very same policies that keep acreage for sugar feedstocks relatively constant and place limits on sugar imports—why is U.S. sugar-based ethanol production under consideration at all?

Get with the Program
When the U.S. Congress passed and President George W. Bush signed the 2002 Farm Bill into law, they did so knowing part of the package included policies to protect American sugarcane and beet producers from low-cost imports being dumped on the world market. Steve Williams, president of two grower associations—the American Sugarbeet Growers Association and the Red River Valley Sugarbeet Growers Association—tells EPM that the sugar beet farmers who make up the two associations would be out of work if it weren’t for these protective policies. The sugar policies limit imports, which helps keep the price at a rate that U.S. sugar feedstock growers can swallow. This keeps them in business, along with their cooperatively owned processing plants. These facilities represent the value-added arm of the growers—with U.S. government-certified quality assurance that comes along with domestic refining.

After times of crisis, however, this import regulation is subject to temporary lifts. This occurred after the disastrous 2005 hurricanes. “There were cases of refined sugar coming in with pieces of burlap in it, rodent feces—it was bad,” Williams says. The real price of refined sugar today is approximately 16 cents a pound, Williams says, but there are many countries that overproduce, allowing untold tons of excess product to be dumped on world markets, reducing that legitimate 16 cents-a-pound price down to 9 to 11 cents per pound. Such a low price makes it hard for American growers to compete. Putting quality issues aside, the idea of opening up the borders to allow the unfettered importation of cheap product into U.S. markets could lead to lower prices for food products containing sugar, which aren’t scarce these days. Following this logic, one might assume that producers currently growing beets and cane could fairly easily switch operations to begin farming crops like corn, supplies of which are tightening beyond previous expectations. This would be shortsighted though.

Major investments over many years have been spent on building the American sugar production complex. Farmers use specialized high-dollar implements for such applications like lifting sugar beets. “Getting out” isn’t as easy as it sounds. If proponents of free trade get their wishes in the upcoming 2007 Farm Bill, however, a relinquishment of policies that favor domestic sugar-crop production and refining could result. Williams says he doesn’t believe this will be the case, though.

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