Corny Problem for EU Sugar Producers

Corny Problem for EU Sugar Producers

Corny Problem for EU Sugar Industry


The abolition of sugar quotas in 2017 will have such a profound effect on EU sugar producers, used to super profits under the EU supported Common Agricultural Policy (CAP), that many smaller producers will be subject to consolidation or have to cease production. The problem will not be due to the increase in sugar production from EU countries that were subsidised for not producing during the quota period but due to a greater threat from a restricted sweetener that is up to 30% cheaper to produce.


In 2017 Isoglucose or high fructose corn syrup also known as glucose-fructose will have its quota restriction lifted within the EU. Isoglucose is mostly made from corn but can be made with wheat.


In the United State Isoglucose is used as a sweetener by up to 50% of the sweetener market. Japan uses it for 20% of their sweetener ingredients. Because of the quota the market share in the EU was only 5% in 2013.


It will not take much to see a rapid substitution of sugar for Isoglucose in soft drinks, bakery products, jellies, canned fruits and dairy products. This amounts to a realistic market transition of about 30% of industrial sugar consuming companies that now use sugar as a sweetener.


If Isoglucose were to reach such drastic adoption then it is likely that sugar surpluses will increase and EU sugar prices will come under extreme pressures. If tariffs stay in place, which is doubtful considering the recent agreement on TTIP trade between the US and EU, the EU farming community may survive, but only for a short time as Isoglucose produced within the EU from 2017 will eventually force substitution anyway.


Cereals prices remain under pressure from abundant world supply, slow demand and mostly good prospects for new crops. The cost of production of Isoglucose, net of raw materials is around $200 (€180) per ton leading to a finished price of $370 (€337) per ton. Compared to the current EU import price of sugar at $529 (€482) per ton, Isoglucose would represent a potentially large export market for US based ethanol producers.


Ultimately it will mean EU sugar producers who wish to keep market share will have to drop their prices by up to 30%.

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Big Oil Can’t Alter Climate Change

Big Oil Can’t Alter Climate Change

Big Oil Can't Alter Climate Change


In a recent major MIT Study (Covert, Thomas, Michael Greenstone, and Christopher R. Knittel. 2016. “Will We Ever Stop Using Fossil Fuels?” Journal of Economic Perspectives, 30(1): 117-38. ) it was shown that approximately 65 percent of global greenhouse gas emissions are generated by fossil fuel combustion. Of these emissions, coal is responsible for 45 percent, oil for 35 percent, and natural gas for 20 percent. The options to reduce greenhouse gases from the air and storing would require an expansion of the size of the world’s forests or build out carbon capture and storage infrastructure at a scale that will more than counterbalance the burning of fossil fuels. The other option is to reduce future consumption of fossil fuels in a drastic manner.


Oil, Oil Everywhere


Today the US crude oil inventory surplus is at a record high. Saudi Arabia and Iraq are pumping out more than 1.3 million extra barrels of oil per day than they were 12 months ago. Iran is commencing the production of 300,000 barrels that is expected to rise to 1 million barrels of oil per day. That leaves what lies in reserve in Libya until the turmoil is resolved. Finally the US in December 2015 shipped its first exported oil to France and Israel since the 70’s.


Russian security oil threat is a joke


Russia would not, nor could not hold Europe to ransom over energy supplies. The reality is that over the last 10 years Russian crude oil production has increased from 9 million barrels a day to 10,400 million barrels. Oil and gas comprise over 60% of Russia’s exports and make up over 30% of the country’s gross domestic product (GDP). Despite the dispute in Ukraine, Russia, just like Saudi Arabia, cannot afford to withhold oil or gas from any country without losing market share, unless the country happens to be Ukraine who owe Russia $3 billion for not having paid for their supply.


Emerging oil balance


Emerging markets such as India, China, Brazil and Russia will likely continue to consume more oil as they continue to grow, but the largest market in the world for consumption of crude oil for transport, the US, would reach an inflection point where renewable energy from wind and solar for electric vehicles, backed up by higher efficiencies of battery storage, would counter the oil demand for transportation in that market.


Taking a peak at a long term oil glut


That is another reason why oil could remain over supplied and below $40 per barrel for decades. The uptake in Electric vehicles will accelerate in the early 2020’s. Growing at 60% a year it is the same growth rate that saw Henry Ford and his Model T gain traction against the horse and buggy. In a Bloomberg report by Tom Randall he suggests that once the cost of batteries get low enough to match the costs of current production vehicles demand for oil will match any growth in world consumption outside of developed OECD countries.


A Solar Ray of Hope


While we boil the world away in barrels of oil there is a small ray of hope. Electricity is getting cleaner and cheaper. Since 2013, the world has been adding more electricity-generating capacity from wind and solar than from coal, natural gas, and oil combined. The move toward a cleaner grid, electric vehicles and renewable power does create a mutually beneficial circle of demand.


Micro capture is the only macro solution


Carbon capture on a large scale is expensive. For mankind to even begin to manage climate change we must achieve a similar result as John D. Rockefeller did at the outset of the oil industry when he converted useless oil into a commercially profitable solution. We must deliver a micro capture solution and incorporate carbon monoxide, carbon dioxide and methane capture systems into everyday fossil fuel consuming equipment. Preferably an alternative to a falsified emission output software application.

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Butterfly Effect of Oil Price on Renewables

Butterfly Effect of Oil Price on Renewables

Butterfly Effect of Oil Price on Renewables


The butterfly effect is a concept that small causes can have large effects. Initially, it was used with weather prediction but later the term became a metaphor used in and out of science. Now it can easily be related to a single decision made by a Saudi Oil Minister.


Parallel Oil Worlds


I read articles on the bioeconomy referring constantly to the “need” to replace fossil fuels, sometimes in amazement, wondering if there are two parallel worlds. I listened to Saudi Oil Minister, Ali Ibrahim Al-Naimi, telling the world that the freezing of oil production at January 2015 levels is merely part of a process. The objective is to force U.S. high cost shale oil producers to shut down, even if Saudi have to produce at $20 per barrel. His direct comment: “It sounds harsh, and unfortunately it is, but it is the most efficient way to rebalance markets”.


Henri Colens, Public Affairs Manager, Renewable Chemicals, at Braskem Europe, mentioned in an interview with Il Bioeconomista that “we all need to work harder on raising public awareness, so that citizens understand what we are doing and the potential of the bioeconomy”.


Oil Power beats Citizen Power


The power of citizens it seems are over shadowed by the flapping of an oil ministers wings when it comes to the biochemical and biofuel market.



Saudi Arabia, Russia, Qatar and Venezuela proposed a freeze that would cap production at January levels. The same day Iran called the proposal for a freeze ridiculous as they began their production of 1 million barrels per day. When the price of oil collapsed to below $50 a barrel in March of 2015, Saudi Arabia and Iraq began to increase production. Since February 2015 Iraq and Saudi have increased production over 1.3 million barrels per day.


Butterfly cascade after one decision


The cost of oil reduces the cost of refining to gasoline which in turn is blended with ethanol. When it drops so low that ethanol is more expensive than gasoline production, demand falls and high cost producers of ethanol suffer serious margin erosion. Citizens are happy as pump prices are lower, but the butterfly effect starts to hit more than shale oil.


Sovereign wealth funds who amassed wealth while oil prices were higher would have invested in growth of the world economy. Now many of them, including Saudi Arabia, Norway and other oil producers are dipping into their funds to balance their fiscal budgets. Russia being one that is suffering on a number of levels with economic sanctions and low oil prices. This leaves little discretionary investment funds for the bioeconomy who are still far from sustainable profitable businesses, leaving little support other than State or Federal supports.


So far from cellulosic ethanol


In 2010-2011 of the five biofuel companies who listed on NASDAQ today only one is still focused on fuel and constantly diluting their shareholders while others are searching for lower volume, higher value added, biochemicals. The search for cellulosic ethanol sees pilot plants such as Abengoa Hugoton achieving costs of $4.55 a gallon of ethanol. Considering the oil price no wonder this has been closed.


The point is that biofuel, or indeed the bioeconomy overall, requires that oil prices are much higher just to survive, both to compete on price, but also to have profits in the petrochemical companies available for investment in these alternatives.


Is Petro-Biofuel hybrid evolution enough?


There are a few hybrids. Braskem, as mentioned above, and Croda International PLC who posted a 10% increase in pre-tax profits where they use 70% renewables such as palm oil to produce ingredients for cosmetics and paint. Although in existence since 1925, they are a good example of how renewables are a work in progress over a timeframe that requires the patience of an evolution rather than the desperation of a revolution. The question is whether the citizens of planet earth have the time to evolve from the oil wars to survive the climate change.

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