Tuesday, February 13, 2007

DOW JONES NEWSWIRES: BRAZIL ETHANOL CAN REPLACE 10% WORLD GASOLINE IN 20 YRS

My comments on the piece below:

The large sums described in the article below will probably arrive in the form of either direct foreign investments, such as those made by Cargill and A.D.M. in 2006, or via hedge funds, like Infinity BioEnergy and Clean Energy Brazil.

These investments may soon make their way toward the development of ethanol-related projects in Brazil and other tropical countries. Investors should, however, be able to navigate the choppy waters of Brazilian business, which, though bearing a resemblance to its American and European counterparts, is different in many regards.

If any disputes arise, for instance, foreigners will discover that recourse to the law exists and generally works, but may take a maddeningly long time. Solving this and other medium-term institutional roadblocks, then, is of paramount importance to Brazil if it wishes to attract large foreign investments (which may have to come anyway, for lack of energy alternatives).

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Go to original

By Grace Fan, Dow Jones Newswires
5511 3145 1489; brazil@dowjones.com

SAO PAULO (Dow Jones)--If the right investments are made, Brazil could replace 10% of the world's gasoline with its bio-friendly cane-based ethanol in 20 years' time, according to a study conducted by a university in Sao Paulo at the request of the country's Ministry of Science and Technology.

However, "what will be necessary is the investment of BRL20 billion ($9.5 billion) per year until then to do so," Luis Augusto Barbosa Cortez, the vice-coordinator of the study at the State University of Campinas, or Unicamp, said Monday in a phone interview with Dow Jones Newswires.

The study has been conducted over the past two years at University of Campinas with participation by Transpetro, the distribution branch of Brazil's state-owned oil firm, Petroleo Brasileiro SA (PBR).

About 20% of the BRL20 billion per year will be needed to invest in ethanol infrastructure, such as warehouses, ethanol-dedicated pipes and improvements in ports, he said.

The rest will be needed to construct new mills as well as to purchase industrial and agricultural equipment, Cortez said. The amount doesn't include the investments needed to ramp up agricultural production, however.

If such investments occur, Brazil could be able to boost its ethanol exports to 200 billion liters by 2025 from roughly 3.4 billion liters in 2006, the study said. However, the country's planted area for sugarcane - currently at 5.4 million hectares for sugar and ethanol output - will need to expand to a hefty 30 million hectares.

These studies don't account for the possibility of converting excess sugarcane mass, or bagasse, into ethanol via new cellulosic technologies - a technological breakthrough expected in coming years that may allow Brazil's planted area to grow at a less-rapid rate, said Cortez.

However, Brazil currently has some 200 million hectares of degraded pastures, where agricultural crops can be planted without knocking down a single Amazon tree.

The majority of the BRL20 billion in investments would have to come from private companies and investors, with the rest coming from Brazil's state-owned development bank, BNDES. Brazil is the world's No. 1 sugar producer and exporter. It is also the world's No. 2 ethanol producer after the U.S., but No. 1 ethanol exporter.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Monday, February 12, 2007

WHAT JUAN VALDEZ HAS TO TEACH BRAZILIANS ABOUT ETHANOL BIOFUEL



Until the late 1950s, Brazil was arguably best-known for its coffee. The country had just won its first World Cup in 1958, in Sweden, so Brazil didn’t really figure on the global radar screen as a soccer powerhouse (the country has since gone on to win four more editions of FIFA’s world cup).

Carmen Miranda had made several appearances in Hollywood movies in the 1940s and 50s, with her tutti-frutti hat and faux-samba demeanor contributing, perhaps fatally, to building a Banana Republic image that Brazil still hasn’t shaken off entirely.

So coffee and the awe-inspiring natural beauty of Rio de Janeiro were basically all that existed, regarding Brazil, in the global consciousness.

Then, in 1959, legendary advertising agency Doyle Dane Bernbach came along and changed that. Hired by the National Federation of Coffee Growers of Colombia, they concocted a fictional personage called “Juan Valdez”, who, along with his little mule Conchita, came to symbolize quality coffee in the minds of Americans and Europeans alike.

With Colombian coffee at the top of everybody’s mind, selling the product became more and more difficult for Brazilian coffee growers, and the industry in Brazil suffered considerably over the coming decades.

Today Brazil is at risk of losing the lead in the biofuels race. A diminishing number of people around the globe recognize Brazil as the only successful biofuels experience in the world.

Ernst & Young, for example, has published a “Renewable Fuels Index”, in which Brazil does not even figure among the top twenty players, lagging behind such alternative energy powerhouses as Portugal, Ireland, and Austria.

Brazil should not give up its position as the largest, most enduring, most successful biofuels experience in the world to companies with a veiled interest in making it appear that the race has just begun.

It hasn’t. It started 32 years ago in a semi-developed tropical country. While big multinationals will always have the incentive to play to their countries of origin, many of them, such as Madison Avenue's PR and advertising agencies, can be used by Brazil to publicize both its past and present experiences.

Just ask Juan Valdez.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Wednesday, January 24, 2007

ETHABLOG INTERVIEWS LEADING BRAZILIAN BIOFUELS CONSULTANT

Marcelo Coelho is one of Brazil’s leading consultants in the sugar and ethanol industry.

Operating out of Ribeirao Preto, Brazil’s main producing region, Mr. Coelho has witnessed, firsthand, the boom in the sector. He has advised many of the delegations and foreign investors that have visited Brazil in recent months. He can be reached by clicking here.

Ethablog: You chose to leave a successful law practice in the city of Sao Paulo and set up shop in Ribeirao Preto, in the interior of the state. What led you to that decision?

Marcelo Coelho: The Ribeirao Preto region is the “agribusiness capital” of Brazil. It has the highest concentration of sugar and ethanol refineries, the largest production cooperatives, such as Cosan and Crystalsev, industrial-equipment manufacturers, which produce mills, cauldrons, and other heavy pieces of equipment. The Ribeirao Preto area is also home to several important services firms and universities that carry a lot of weight in the sector, such as ESALQ (Escola Superior de Agricultura Luis de Queiroz). And, finally, the biggest fairs in the sugar and ethanol industry in Brazil are held here, such as “Fenasucro” and “Agrishow”. This all makes establishing an extensive network and conducting business significantly more profitable.

Ethablog: What are the main differences between the sugar and ethanol business in Brazil today and that of ten years ago?

MC: I would say that scale and applied technology are the main differences. Planted area has more than doubled, due to internal demand, which surged because of Brazil’s adoption of flex-fuel cars. With growing foreign interest in adding ethanol to the energy matrix of other countries, sugarcane planted area grew exponentially. As to technology, we have adopted new varieties of sugarcane, developed by local universities. Sugarcane, as you often point out on Ethablog, yields a lot more energy than corn, and the new varieties are even more productive. They newest ones have been specially tailored to specific kinds of soil. Another fundamental difference is that the planting and harvesting processes have become much more mechanized, while plant and farm managers have developed better managerial skills.

Ethablog: What does the foreign investor coming to Brazil typically look like? What is he looking for? Greenfields, equipment, smaller companies, inventory?

MC: That is a very good question. Americans generally want to acquire units that are already operational, here in Brazil. They then seek to expand in a continuous and sustainable manner, in order to ship ethanol to the U.S.

Countries like China and India are intent on acquiring technology to use in their own countries. We also see Indonesia starting to head that way.

The Germans, on their turn, who are one of the leaders in biofuels technology and have solid public policies geared toward reducing dependence on foreign fossil fuel, have strengthened their ties with Brazil, in order to firm agreements that will address gaps in the energy matrixes of both countries.

Investors from other parts of the world are mostly interested in studying how Brazil transformed ethanol into a viable fuel, and how we have been using it in a commercially-feasible manner for over thirty years.

It is important to point out that the most conscientious investors come from Europe, who attach a lot more importance to the climate crisis and to the unstable nature of oil-producing regions.

Ethablog: Do you see any strong correlation between the price of oil and the price of ethanol?

MC: In Brazil, the price of ethanol is still adjusted by supply and demand, both for the domestic and the foreign market. Factors that might shift the supply and demand curves one way or the other include domestic income, Brazil’s population growth, the use of substitutes, the exchange rate, foreign income, weather conditions, and production costs.

Ethablog: Are there any assets on the local market that are often overlooked by foreign investors, but that could be of interest?

MC: We find investors to be willing to acquire only production units that are completely balanced, both tax-wise and financially. However, those that have significant tax and financial liabilities are often overlooked. I believe these companies represent the greatest opportunities for investment. Debts are negotiable – in many cases, they can be significantly reduced. Because of these debts, the amount to be paid is a fraction of what is normally charged on the market, and the terms surrounding the deal are much more attractive. After the liabilities are taken care of, and through the adoption of professional management, mindful of market conditions, the units pay off very quickly.

There is also the opportunity to acquire vast amounts of straw and bagasse (crushed sugarcane). These sugarcane byproducts allow for the production of synthetic fuels. Using gasification, we can produce carbon monoxide and hydrogen. It is important to point out that any biomass that contains carbon can be used for this process.

In Brazil, these byproducts are piled outside a plant, or sold at low prices to be burned, or used to cover the soil. All in all, a worthwhile investment.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Saturday, January 20, 2007

TRACING ETHANOL-POWERED ENGINES IN BRAZIL TO THE 1950’S

Go to original

The greatest experiment in the world in the commercial exploration of biomass as a source of energy has taken place in Brazil. The Brazilian National Alcohol Program (ProAlcool – previous post), which has promoted the use of ethanol fuel made from sugarcane, is at the center of this experiment.

Brazilian experience has shown that it is possible to implement a large-scale alternative energy policy in a very short period of time. Ten years after the program’s inception in 1975, sales of ethanol-powered vehicles reached their peak. At the height of the program, between 1986 and 1989, over 90% of the automobiles produced by GM, Ford, Volkswagen, and FIAT in Brazil were powered by ethanol.

ITA (Instituto Tecnologico da Aeronautica, the Brazilian Air Force Technological Institute), was a pioneer center in the development of ethanol engines. Colonel Urbano Ernesto Stumpf, an engineer and professor, was at the forefront of the effort to develop the engine, a feat accomplished in 1953. The first steps towards industrialization were taken by Prof. Stumpf, who began his tests with the car fleet belonging to TELESP (Telecomunicacoes de Sao Paulo), the government-owned telecom carrier of the state of Sao Paulo. In the 1970s, the ethanol engine was introduced to the entire country.

Continued research on alternative engines and fuels led the Engine Division of the Institute for Research and Development (IPD) of the Brazilian Technical Air and Space Center (CTA) to also develop the first bus engine powered by natural gas.

Prof. Ernesto Stumpf was born in Rio Grande do Sul, Brazil’s southernmost state. He is considered the father of Brazilian ethanol, as he was head of the Engine Research Lab of the CTA, in the city of Sao Jose dos Campos, in the state of Sao Paulo. He began his career as a sergeant at the Specialists’ School of the Brazilian Air Force, in the field of Engine Mechanics. After several years of study, he became an Aeronautical Engineer at ITA, where he lectured for twenty years.

His interest in ethanol dates back to 1951, when he earned his degree. At the time, a project was required for graduation, and he worked on an ethanol-powered engine toward that end.

His company, called PENTRA, was charged in 1974 with developing ethanol engines, which met with immediate success. His pioneering attitude in a wide range of fields, from the introduction of ethanol as automotive fuel to the production of the first engine powered by vegetable oil, won him several awards.

Prof. Stumpf received a posthumous tribute in 2004, when Law # 10,968 was passed, changing the name of the airport of the city of Sao Jose dos Campos to “Sao Jose dos Campos Prof. Urbano Ernest Stumpf Airport”.

In the 1980s, several patents for an ethanol-powered vehicle were registered by the CTA, with Prof. Stumpf as the inventor. Patent PI 8106855 shows a carburetor specifically designed for ethanol. The invention describes a carburetor with a variable-area Venturi, designed to run on combustible ethanol. Traditional carburetors for gasoline-powered engines, when adapted for use with ethanol, presented deficiencies in the pulverization of ethanol and uneven distribution of the air-ethanol mix, in addition to problems involving the corrosion of the materials used.

Because traditional carburetors are made of zinc and tin, ethanol becomes a perfect electrolyte, because it contains water and conducts electricity. Attempts to line the inner surfaces with anti-corrosives or plastics did not work. Variable Venturi carburetors, in which the Venturi simultaneously executes power modulation, had been rarely used up to then because of problems with sealing. The invention proposed by Prof. Stumpf in this patent consists in the substitution of the metal body of conventional carburetors for a body made of plastic, with no canals or screws. A piston (12), which moves inside a cylinder (13) balances out the axial forces, due to differences in pressure, which acts on the fuse (9). This difference is balanced through a tubular stem (10). The pulverization orifices are found in a ring canal in the periphery of the strangled section of the Venturi.

(to be continued)

Sources:

http://www.uol.com.br/bestcars/ct-combu.htm
http://www.uol.com.br/bestcars/ct/alcool.htm

http://geocities.yahoo.com.br/prcoliveira2000/motoresaexplosao.html

http://elogica.br.inter.net/ladislau/fontes.htm

http://elogica.br.inter.net/ladislau/biomassa.htm

http://www.ecomm.com.br/carosamigos/outras_edicoes/grandes_entrev/bautista.asp

http://www.mast.br/videos/tecnologia.htm

http://www.sbpe.org.br/v1n1/v1n1a2.htm

http://www.rits.org.br/pbsd

http://luciano.stanford.edu/~franca/ita/pub/ita.html

http://www.aondevamos.eng.br/boletins/edicao07.htm

http://www.udop.com.br/tecnologia/materias/tec_10_09_01.htm

http://www.udop.com.br/tecnologia/materias/tec_16_08_01.htm

https://www.planalto.gov.br/ccivil_03/_Ato2004-2006/2004/Lei/L10.968.htm

Cronologia do Desenvolvimento Científico e Tecnológico Brasileiro, 1950-2000 (“Chronology of Brazilian Scientific and Technological Development”), MDIC, Brasília, 2002, pages 83, 91, 93, 95
Crônicas de Sucesso, Ciência e Tecnologia no Brasil (“Tales of Success, Science, and Technolgy in Brazil”), Ed.
Ciência Hoje, page 31

Special thanks to the inventor’s son, Ricardo Dantas Stumpf (stumpf@solar.com.br), who, in December 2004, contributed to this report.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Thursday, January 18, 2007

PETROBRAS, BRAZILIAN STATE-OWNED OIL COMPANY, CONSIDERING ENTERING ETHANOL BUSINESS

"O Globo Online"
Via Ethanol Brasil

January 17, 2007

Go to original

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Petrobras, Brazil’s state-owned oil company, has been considering the possibility of producing fuel-grade ethanol from sugarcane to meet growing demand, said a company executive on Wednesday, January 17, 2007.

Petrobras already operates in the transportation and distribution of ethanol (previous post) both in Brazil and abroad.

“The company Board still hasn’t made a formal decision… We are still studying the possibility”, Mr. Nilo Carvalho Vieira Filho, the company’s Executive Manager for Marketing and Business, said at the Reuters Global Biofuel Summit.

Speaking from company headquarters in Rio de Janeiro, Mr. Carvalho said Petrobras seeks to take advantage of the growing international demand for alternative sources of energy.

He said that, since the Oil Crises of the 1970s and 80s, Petrobras has been involved in the development of ethanol as fuel, initially serving only the Brazilian market.

Brazil has a favorable climate, as well as the necessary technology and the lowest costs of production”, he said. “We are looking for new clients, opening up global frontiers”.

Mr. Carvalho said that Japan Ethanol Trading, a 50-50 joint venture between Petrobras and a Japanese state-owned trading company, is developing the Japanese ethanol market.

Commenting on a report from Reuters in Tokyo on the imports of MTBE from France as a gasoline additive, Mr. Carvalho said that this fact does not exclude the use of Brazilian ethanol, for the demand for energy is very robust.

Petrobras is already exporting ethanol to Venezuela and hopes to sell the fuel to Nigeria and countries in Scandinavia this year.

“Every day we receive new demonstrations of interest from other countries”, he added.

The company is also offering technical assistance for the use of ethanol, in agreements with South Africa, Venezuela, and Nigeria.

The United States has the capacity to find its own alternatives, but Petrobras has extensive experience with fuel ethanol, which can be used to develop solutions when the need arises, said Carvalho.

Mr. Carvalho said that ethanol exports are expected to rise to 850 million liters in 2007, compared to 120 million in 2006.

Shipments have included sales to the United States, directly or through the Caribbean, a region that has preferential access to the American market. Mr. Carvalho noted that sales were not larger because of U.S.-imposed tariffs.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Wednesday, January 10, 2007

CLEAN ENERGY BRAZIL ADMITTED TO LONDON'S AIM



My comments on the piece below:

The smart money in Europe shares many of the views expressed on Ethablog. The following quotes appear further below in the body of CEB's press release.

"Brazil is the world's largest sugar producer and exporter and is the lowest cost producer of raw sugar in the world."

• "As a result of the reform of the European sugar regime the directors (of CEB) believe there will be a sharp decline in EU sugar production and exports, thereby reducing world sugar supply, and hence benefiting Brazil."

• "Overall demand for Brazilian bioethanol is expected to rise due to the recent introduction of flex-fuel cars - cars which can run on any mix of gasoline or ethanol."

• "The directors of the Company believe that the global bioethanol market is in its infancy, and that high energy prices, environmental concerns and political pressures will continue to support expansion in the use and development of biofuels."

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Clean Energy Brazil Plc, an investment company with a mandate to invest directly into Brazil's sugar and ethanol industry, is pleased to announce its admission to trading on the AIM Market of the London Stock Exchange (which is expected to occur at 8am today)

Numis Securities conceived and developed the CEB concept, built the management team, and has backed the company alongside institutional investors. Numis is also a major shareholder in Temple Capital Partners, which will manage CEB's funds.

Admission Statistics

Placing Price per Ordinary Share: £1

Number of Ordinary Shares in issue on Admission: 100 million

Gross proceeds of the Placing: £100 million

Market capitalisation at the Placing Price: £100 million

Warrants which are also expected to commence trading on AIM at 8am today have been issued on the basis of 1 warrant for 4 ordinary shares. Placees will also receive shares in Temple Capital Partners Limited.

Overview

• An AIM listed investment company, designed to take advantage of the growth potential and the consolidation opportunities in Brazil's sugar and bioethanol industry

• CEB has agreed an initial investment of $137m into a fully integrated existing sugar/ethanol asset with associated greenfield projects, full due diligence has been performed and the investment agreement has been finalised

• CEB is seeking to pay a 5p dividend in respect of the period to 30 September 2007, and is targeting an aggregate IRR of 25% on capital invested

• CEB's Non-Executive Chairman is Antonio Monteiro de Castro, the current chief operating officer of British American Tobacco plc

Strategy

CEB proposes to invest in both existing sugar and bioethanol production units and in new greenfield projects. Investing in new projects will capture the inherent development premium, whereas acquiring equity in existing assets will capture immediate cash flows.

The target assets comprise agricultural sugar cane plantations, industrial milling facilities, sugar and ethanol production facilities, and associated export logistics infrastructure.

There is significant scale in the sugar cane industry in Brazil; the current total land dedicated to sugar cane production is approximately 6 million hectares. However, consolidation in the sector is very rare, most ethanol/sugar production facilities still remaining family owned and run businesses.

Investment Adviser - Temple Capital Partners

Two leading industry advisors have been brought together by Numis to form one of the largest teams of professionals working in the sugar/ethanol sector in Brazil.

• Czarnikow Sugar: one of the largest physical brokers of sugar in the world, Czarnikow Sugar dates back to 1861 and is today represented in 11 countries, employing some 130 professionals. Czarnikow Sugar provides mergers and acquisition advice, trading, hedging, shipping, consultancy and risk management services. Its key clients include large international corporations, sugar millers, refiners, and traders around the world.

• Agrop: a leading sugar cane agronomy outsourcing company in Brazil,

Agrop provides agronomy and agricultural/industrial services for some of the largest sugar mills in Brazil. The Chief Executive Officer and joint owner Marcelo Junqueira is a landowner, farmer and shareholder in one of the largest sugar mill companies in Brazil. The Junqueira family is one of the most well-known and respected 'sugar families' in Brazil.

Rationale: Ethanol/Sugar/Brazil

Brazil is the world's largest sugar producer and exporter and is the lowest cost producer of raw sugar in the world.

• As a result of the reform of the European sugar regime the directors believe there will be a sharp decline in EU sugar production and exports, thereby reducing world sugar supply, and hence benefiting Brazil.

• Overall demand for Brazilian bioethanol is expected to rise due to the recent introduction of flex-fuel cars - cars which can run on any mix of gasoline or ethanol.

• The directors of the Company believe that the global bioethanol market is in its infancy, and that high energy prices, environmental concerns and political pressures will continue to support expansion in the use and development of biofuels.

Peter Thompson, Chairman of Temple Capital Partners Limited, and Director of Czarnikow Sugar commented,

'Clean Energy Brazil gives a London equity window on the world leading Brazilian sugar and ethanol industry. Both the industry and Clean Energy Brazil are facing enormous growth in demand for their products; they will benefit from the growing awareness that cars fuelled by ethanol from sugar cane can be part of the solution to global warming.

To maximise the return to investors we have raised only the money that we believe we can immediately invest. CEB is seeking to become a major participant in the Brazilian sector, and has numerous projects under consideration.'

Oliver Hemsley, Chief Executive of Numis commented,

'We continue to set Numis apart as an innovative investment banking business. The Numis team conceived and developed the concept of Clean Energy Brazil and has built the management team. As partners with Czarnikow Sugar and Agrop we look forward to building a company of scale in this growing market.'

Marcelo Junqueira, Founder and CEO of Agrop, and Non-Executive Director of Clean Energy Brazil commented,

'The sugar cane industry in Brazil is the major player in the international sugar market, and the world leader in ethanol production. Understanding Brazil's sugar and ethanol sector at a local, hands-on level is absolutely fundamental to the success of CEB, and I believe investors have recognised the quality and depth of the team we have assembled.'

18 December 2006

Enquiries:

Numis

Andrew Dawber - Managing Director, Corporate Finance

020 7776 1500


Tom Frost - Associate Director, Corporate Finance

Smith and Williamson Corporate Finance


Azhic Basirov - Director

020 7131 4000


David Jones - Director

College Hill


Peter Pantlin - Director

020 7457 2020


Paddy Blewer


Biographies of key personnel

Antonio Monteiro de Castro - Non-Executive Chairman of CEB

Antonio is the chief operating officer of British American Tobacco plc, a constituent of the FTSE 100 index. In addition, Antonio is non-executive chairman of the Souza Cruz S.A. Administrative Council (one of Brazil's leading companies), and a director of Fundacao Getulio Vargas, Brazil's foremost education and research foundation. Antonio has an MBA from Babson College in the US.

Peter Thompson - Chairman of Temple Capital Partners, Director of Czarnikow Peter has 20 years' experience of working in the sugar industry, the last 10 years as a director for Czarnikow. Based in London, Peter typically spends one week a month in Brazil and is responsible for Czarnikow's Brazilian activities. He is a fluent Portuguese speaker, and will lead the Temple team in providing advice to CEB.

Marcelo Junqueira - Founder and CEO, Agrop

Marcelo is the CEO of Agrop. He has spent his entire life in the sugar and ethanol industry in Brazil, and he is a member of one of the most influential sugar families in Brazil.

Numis Securities

Numis' New Energy and Emissions sector team is dedicated to developing and presenting investment opportunities across the renewable energy and emissions reduction spectrum.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Tuesday, December 26, 2006

ON SUGARCANE AND SOIL EROSION IN BRAZIL

Relevant links:

http://www.evworld.com/view.cfm?section=article&storyid=1107

http://www.solovivo.com/

Depending on how a soil is managed along the successive culture cycles, it may degrade severely, losing progressively its capacity to hold water, air and LIFE. Consequent destruction of its aggregates results in compaction and/or erosion.

Sugar cane and soil erosion

Milton Maciel

Depending on how a soil is managed along the successive culture cycles, it may degrade severely, losing progressively its capacity to hold water, air and LIFE. Consequent destruction of its aggregates results in compaction and/or erosion.

If this happens in the sugar cane industry, all depends on how cane is cultivated and how its processing residues are returned to the culture land. For best results, it is mandatory that cane isn't burned for making harvest easier. At the origin of all is the large biomass that not-burnt cane leaves on field.

Stalks, taken to the mill, are just a part of what the cane plant produces yearly. A large mass of tops, green leaves and dry leaves (trash) remain over the soil after the cane is harvested. This may exceed 15 tons/year as organic DRY matter. Aerobic digestion takes a part of that to the air as carbon dioxide and water vapor. And the remaining material results incorporated slowly to topsoil, contributing with crude organic matter, then humic and fulvic acids as it is turned into humus and then mineral nutrients as it finally mineralizes. During the process, that layer serves also the functions of protecting soil against heavy rains and winds and making emergence of weeds much more difficult.

In round numbers, each plot of integral harvested sugar cane results in

15% sugar

15% bagasse (dry matter)

15% trash (dry matter)

Trash is the combined result of dry leaves, green leaves and tops, all left over the harvested plot or burned, meanwhile the stalks are taken to the mill.

To burn or not to burn?

This mixed residue is burned in order to make manual harvest easier, safer and more yielding. The combustion of trash has a tragic record for soil fertility and is a clear squandering of a very rich source of organic matter and nutrients for this soil. Most minerals remain at place as ashes, but nitrogen and sulfur are lost to the air, contributing to pollution, as their oxides are harmful to environment and human health. Of course, burning cane is also a process of liberating CO2 to atmosphere, contributing to global warming, instead of making a considerable part of this Carbon available to soil life and fertility. As sugar cane burning fumes have very harmful effects on the health of people in the cities near by, pose dangers to aerial navigation, and is also harmful to the manual harvest workers themselves, it is to be phased, by force of law, until the year 2018.

But we have to consider not only the loss of matter (sulfur, nitrogen, carbon), but also the absurd loss of ENERGY that goes with the hot gases of trash combustion in the fields. Some studies point to the possible use of trash as a source of energy in the factory, for feeding its boilers, replacing a large part of bagasse. This surplus bagasse could then be employed to produce more ethanol (since cellulosic ethanol process may become economically feasible) or other byproducts. For the moment the main obstacle is HOW to harvest and transport this trash to the mill.

Organic sugar and ethanol mills say that they would never prefer not to take trash to the factory, as they use the whole mass of trash to protect soil, combat weeds and, more important, to recycle nutrients. They affirm that this is one of the principal reasons why their stalks yield is so much larger than that of conventional farms (plus 30%) and why the useful life of the cane plantation is also much larger (plus 50%, average).

Anyway, both in organic or conventional sugar cane farming, mechanical harvest is the best way to avoid burning and of preserving the best soil protective and nutritive qualities of trash.

When managed so, especially under organic cultivation, sugar cane can contribute to a regenerative effect on soil fertility. To explain this may be somewhat long and somewhat technical, but is extremely simple. I’ll start considering the most severe depletion that cultures cause in topsoils, EROSION. The nutrients issue may come in a following post, if you wish.

TYPICAL EROSION RATES FOR SUGAR CANE AND OTHER CROPS IN BRAZIL

Let’s consider first the worst case design, when sugar cane is produced by conventional chemical agriculture and is submitted to the use of fire at the moment of harvest. Typical measured erosion is 12 ton/hectare of top soil/year (#1). When cane is not burned and the remaining shopped pieces of tops, green and dry leaves are left standing over ground, erosion rate is 5.7 ton/ha/year (#2). This is the typical result of harvesting green crude cane with a combo mechanical harvester.

The first number seems to be high; but as we compare it with erosion rates for other cultures, we find, under the same conventional agriculture methodology, in Brazil:

CROP…………………EROSION rate (in ton/ha/yr)
Castor oil beans..…………..40
Beans………………………..38
Cotton…………………….....25
Soybeans..………………….20
Sugar cane (#1)…………….12 (burnt before harvest)
Sugar cane (#2)……………...6 (biomass of chopped tops, green and dry leaves left over ground)

Sugar cane (#2.0), ………….0 (organic: actually there is a net gain of material in topsoil)

[For all crops, for sake of comparison, we consider a standard soil slope of 10%, limiting value for mechanical harvest of sugar cane].

Now let’s first understand the architecture of the sugar cane plant. STALK is the part of sugar cane plant that is taken to factory, in order to be pressed in the mill for extracting the sugary juice. The other parts of the plant stay on the culture plot.

As I can’t use a picture here, please just imagine (or make a simple draw yourself) you have a 3 meters (~10 feet) high plant. For making things easy to understand, suppose you cut this plant at a height of 2 meters and also cut it close to the ground. This piece is the STALK. The remaining upper part is the TOP. Top’s juice doesn’t have enough sugar and has undesirable components in it; that’s why it is uninteresting to the mill. Attached to stalks and tops there is a lot of leaves. Most of the stalks leaves are old and die as the plant grows. These are DRY leaves; a great part of these leaves fall spontaneously (deciduous leaves) and cover the ground with a protective layer. There are also many newer leaves, alive and making photosynthesis, attached to stalks and tops. These are the GREEN leaves.
When cane is burned, fire propagates very easily because of the great mass of those dry leaves over the soil and dry leaves still attached to stalks. Then green leaves are dehydrated and burn too. Part of the tops still remains and all stalks resist the high temperature, because of its high (70) % moisture content. Under such conditions, a large part of biomass is lost, but most mineral nutrients remain in the resulting ashes, made available to the new cycle of growing through water of rains – except for nitrogen and sulfur, that are lost to the air as oxides, in fumes.

The only partial protection that this culture land receives is that proportioned by fallen dry leaves during the second half of culture cycle of one year. During the first months after harvest, when plants are growing again, leaves are new and of low height. With a standard distance of 1.4 meters (~5 feet) between rows, soil is bare, with limited protection from the trash that remains over soil, after burning and after cut tops are left on ground. Soon after harvest, starts the rain season and, under severe tropical rains, most of the erosion occurs. Under these circumstances, weeds thrive and cultivation is required, mechanical or chemical (herbicides). More erosion! Then, along the rain season, as the plants grow and grow, emitting ten or more stalks per plant and a lush of new leaves, they eventually get to cover the whole area, leaving conditions for weeds development and for erosion very unfavorable.

You must consider that I’m not mentioning anything about organic cultivation until this moment. So, the better score for conventional sugar cane (#1), when compared to other crops, is to be credited only to the sugar plant itself - its architecture, its cycle, its characteristic of semi-perennial culture, its deciduous (=falling) dry leaves, its very high photosynthetic conversion, its very high biomass production. As I always say, this plant is a kind of miracle of Mother Nature. You could never compare this plant culture with a culture of corn, aimed to the same objective of producing ethanol.

Now, before I can proceed and talk about organic cane’s soil regenerative possibilities, I would like to put those numbers on erosion under a frame of reference, so you can evaluate what they mean. When I say that a soybeans’ plot shows a typical erosion rate of 20 tons/ha per year, you have to consider that:

1 hectare = 10 000 square meters

Then suppose you cut a slice of that whole hectare, with a 20 cm depth. Your volume would be

10 000 m2 x 0.2 m = 2000 m3

This two thousand cubic meters is the volume of this 20 cm slice. It is the typical volume of this area TOPSOIL (Horizon A). Now let’s see what would be the weight of this topsoil layer, in tons:

Well, now we have to remember that the average DRY density of soil is somewhere between 1.52 grams/cubic centimeter for pure sand and 0.9 for a forest topsoil (it’s so light that it would float on water, if we could seal it against leakage).

Let’s say we have a SILT LOAM, whose dry (or bulk) density is 1.28 g/cm3. Evidently, the corresponding REAL soil would be lighter, because it would have to include a water and an air phase too. But let’s only consider that dry density:

We have 2 000 m3 of topsoil, with a dry density of 1.28 g/cm3

As 1g/cm3 = 1 000 000 grams / m3 = 1 ton/m3, we may now calculate:

2000 m3 x 1.28 ton/m3 = 2 560 ton/hectare is the weight of our silt loam topsoil

Then consider erosion rates. Divide them by 2 560 tons/ha and multiply by 100:

Beans……………..…..38 ton/ha/yr………..1.48% per year
Soybeans………….….20 ton/ha/yr………..0.78%
Sugar cane (#1)……...12 ton ha/yr………..0.46%
Sugar cane (#2)……….6 ton/ha/yr………...0.23%
12 tons is the weight of a slice of topsoil that is:

2 560 tons - 20 cm
12 tons - x cm Then x = 0,1 cm DEEP = 1 MILLIMETER

A ONE INCH (2.5 cm) layer of one hectare of this silt loam would weight:
20 cm 2 560 tons
2.5 cm x tons where x = 320 tons

Then, 320 / 2560 x 100 = a 12.5% yearly erosion would be needed, to loose one inch of this silt loam topsoil.
Of course no good professional farmer would loose such a foolish amount of soil in one year.

In short, these are the reasons why sugar cane is so much more efficient, at the culture field, than any other plant used for producing ethanol, including its marvelous low rate of soil erosion and high yield of both biomass of cellulosic material and sugar.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Saturday, December 09, 2006

BRAZILIAN ETHANOL AS A BACKSTOP ALTERNATIVE TO OIL

My comments on the piece below:

The following paragraphs are a small part of a brilliant article by economist David Cohen, and were taken from “The Oil Drum”, a site that discusses Peak Oil and its consequences.

Mr. Cohen notes that biofuels are one of the only alternatives to gasoline derived from light, sweet crude. The only other remotely-viable options are heavy oil shales and tar sands, both of which are big polluters and very costly to process.

To Mr. Cohen acknowledges that there is, indeed, a substantial difference between ethanol made from corn and ethanol made from sugarcane. He believes that “the current enthusiasm for ethanol from a corn feedstock (as opposed to Brazil's use of sugarcane) is a good case in point. The hyperbole (surrounding corn ethanol) leads to a false belief that the substitute under discussion is a perfect backstop for conventional oil.”

The section below comes at the end of a rather lengthy and informative article. I encourage you to read the rest by clicking here. H.O.

********************************************

The Tragic Consequences of the High Discounting of Oil Extraction

An economic theory of finite non-renewable resources refers to a perfect backstop. This is more widely known as a complete substitute for the resource under consideration, which is conventional oil in this case. If such backstop exists, then Hotelling theory predicts that the price should rise according to Figure 6, taken from Khanna.

Figure 6 – Impact of Backstop Resource. Pnr indicates the price of the non-renewable resource; Pb indicates the price of the backstop. Tnr indicates the depletion of the nonrenewable resource.

The fundamental insight is that the price rises and the remaining resource stock is all used up prior to the switch because the existence of a perfect substitute renders the resource worthless. In theory, when the price reaches the backstop price, all of the resource would have been consumed and substitution occurs. Therefore, the perception that perfect substitutes actually exist increases the extraction rate of the resource.

Do perfect substitutes for conventional oil exist? The answer is "No". There is no perfect backstop but there are a plethora of imperfect substitutes—that we might call wedges—that might replace some part of the role conventional oil plays. The very notion of a substitute for oil is fuzzy. Note that in the general case, almost any abundant source of hydrocarbons, regardless of considerations affecting their production, is perceived as a backstop for conventional oil. Here is a brief list of the main wedges.

1. Canadian tar (oil) sands
2. Orinoco heavy tar
3. Coal/Natural Gas/Biomass to liquids
4. Oil Shales
5. Electric transportation
6. Wind, Hydro, Solar and Nuclear to support #5

It is important to remember that when one hears hyperbole about any of these substitutes, it is not the case that any of these backstops is perfect because they don't scale or their net energy return is low (if not = 1) rendering them expensive —and in the worst case— uneconomic to produce. This is just a partial list. The current enthusiasm for ethanol from a corn feedstock (as opposed to Brazil's use of sugarcane) is a good case in point. The hyperbole leads to a false belief that the substitute under discussion is a perfect backstop for conventional oil. Kronenberg states that for both the resource owner O and the resouce consumer C, this can lead to what he calls strategic interactions that lead to serious market failures.

Strategic Interactions

Here is a description of the game that Kronenberg terms strategic interactions.

* The resource owner O knows the total stock of the resource. The resource consumer C does not.
* C has the option of developing a backstop technology at any time
* O can delay the development of the backstop by influencing C's decision by lying about the stock of remaining resources.

Here is the result as described by Kronenberg (page 25):

Thus, if there are information asymmetries between the owners and consumers of a resource, strategic interaction takes place, and credible announcements play a critical role. Specifically, resource owners will have an incentive to overestimate the resource stock, so as to delay the development of substitutes for the resource. To make this announcement credible, they have to follow an extraction path consistent with the overestimated resource stock, so extraction will be faster than socially optimal. Resource consumers will have an incentive to announce the development of a backstop technology, and resource owners will react to this threat by raising the extraction rate and lowering the resource price (if the demand curve is downward sloping). In both cases, resource extraction occurs faster than socially optimal.

This interaction may be viewed as a reason for the failure of the Hotelling model. In fact, the suspicious OPEC reserves increases that took place in the 1980's is cited as a possible example and Kronenberg notes that resource (both national and state-run) owners have clear incentives to systematically over-estimate their remaining reserves which, in turn, leads to serious market failures. In order to manage consumer perceptions, extraction must remain higher than is socially optimal for a finite non-renewable resource in all cases.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Thursday, December 07, 2006

APPLES, ORANGES, SUGARCANE AND CORN

Milton Maciel speaks with the authority of a former government official who served as Secretary of Agriculture in Brazil’s northeastern state of Alagoas, one of Brazil’s main ethanol-producing regions.

ETHANOL, OIL AND EROEI

Milton Maciel

From Brazil

Relevant links:
http://www.solovivo.com/

http://www.evworld.com/view.cfm?section=article&storyid=1107

The standard method for evaluating net energy of an energy resource is the measure known as EROEI, meaning Energy Returned On Energy Invested. If this number is larger than one, then we a have an energy source. If EROEI is lesser than one, then we have an energy sink.

One of the most controversial issues now is the figure for EROEI for ethanol. As corn ethanol EROEI is so low (1.3 : 1), in USA, there is in this country a general trend to nail sugar cane ethanol in the same coffin. However, this is a problem specific with corn and its conventional agrochemical cultivation, less efficient than sugar cane cultivation under the ideal conditions it finds in Brazil tropical land, where it is grown rain fed, avoiding the use of expensive and water depleting irrigation.

Sugar cane ethanol EROEI, under correct technologies, is much higher than that for corn ethanol.

Its minimum figure of 8.3 : 1 (as of 2001) is now already outdated, even for conventional cane cultivation, in Brazil. Not only in cultivation technologies, but also in industrial distillation processes, further advancements were achieved. The new study we’re preparing for publication now shows considerable higher results for 2007 and an at least 20% increase in EROEI figures in the coming two years. This holds for conventional chemical sugar cane. When we apply figures to organic sugar cane, EROEI has a potential for further increasing, theoretical limit being as much as 50% higher.

With an average yield (5 years) of 85 tons/hectare of cane stalks in south/center region, for conventional chemical cultivation, and an average of 85 liters of ethanol produced from each ton of cane stalks, we have an average production of 7225 liters of ethanol per hectare. (1 hectare = 2.47 acres)

With an average (9 years, least case) of 109 tons/hectare of cane stalks in the same region (where 85% of all Brazil’s sugar cane is produced) for organic cultivation and the same industrial average of 85 liters of ethanol per ton of stalks, we have an average of 9265 liters of ethanol per hectare.

As a comparison, corn ethanol production, for an average high yield of 150 bushels/acre in corn grain, is 400 gallons/acre, the equivalent of 3750 liters/hectare.

Why is sugar cane so more efficient?

First is the reality that sugar cane is just a rude perennial grass that is farmed as a semi-perennial culture, while corn is an annual culture, one that must be sown every year, with the corresponding expenses in seeds, energy, fertilizers and soil movement, plus a more intense schedule of pesticides use.

Under conventional cultivation, sugar cane in Brazil it is the large culture that is less chemicals dependent, consuming annually less than 20% of the fertilizers and pesticides consumed by soybeans, for instance. The conventional culture, once planted, is kept producing for 5 to 6 years and, only then, is renewed. Organic cane areas are subject to renewing only each 9 to 18 years, with considerably higher yields. Furthermore, total area dedicated to sugar cane in Brazil, devoted to ethanol production, is still less than 1% of total culture and pasture available land.

Incidentally, I think the same organic cultivation techniques we use in Brazil for sugar cane could be applied in Hawaii (USA), Australia, India and many other countries, with particular emphasis in some countries of Africa, the ones I believe may become the best bioenergy exporters for Europe and Asia (I’m just working on this subject now), the same way Latin America may become an important bioenergy partner for USA and Canada. In regions where exists temperature, fertility or water restraints, organic methodology can compensate much of the difficulties found with conventional chemical cultivation.

EROEI is not all

It is my particular position to think that we cannot place EROEI in a sacred unarguable position for evaluating alternative energies. It is evident that, by no means, an EROEI value smaller than one is a good thing. But, in some particular cases, maybe even that could be tolerated for some time. As an example, I recall that, at the very beginning of Brazil’s ethanol large scale production for oil substitution, after 1975, the alcohol cost of production was more than twice the cost we have today. Also, in the seventies, ethanol was heavily subsidized and today there isn’t any kind of subsidies for it. In 30 years a spectacular change occurred: from heavily subsidized to not at all subsidized and with a large cost reduction, because of important gains in both cultivation and industrial processes. Since then, more than a million direct jobs have been created and maintained and more than 100 billion dollars have been saved from being lost as oil imports.

We must also consider that sugar cane and sugar cane ethanol industry is one of the least capital intensive and one of the more fast industries to install. In one year you can plant cane and build a distillery, starting to operate it in less than 1.5 years since starting point.

EROEI and costs for oil

EROEI is important in evaluation of economical costs, but that may be a somewhat limited concept, because I think is not safe to consider EROEI independently of TOTAL costs. In other words, it doesn’t help if we have a good energy yielding source per se, as oil, maculated by a very negative record of indirect and hidden costs. These hidden costs are an important part of the EI factor (the denominator) and, like that, they cannot be dismissed.

When we think of costs, we cannot think of economic costs only. We must consider the environmental and the social costs too. So, as our standard reference for EROEI is oil, there are three points to consider:

1 – Oil EROEI has been falling constantly with time, as lighter oils are extracted first and remaining reserves include mostly oils that are heavier, deeper and more difficult to extract. From figures as large as perhaps 100:1 we are arriving to 10:1 and even lower relations. So oil EROEI is not uniformly a high value. On the contrary, it is on the verge of becoming itself a worthless figure very near to one for a very large number of wells and whole fields in plain depletion, demanding absurd energy inputs.

2 – On the matter of SOCIAL costs, oil has a terrible roll of costs – most of them related to military and wars for oil and gas. And, also, related to the tyranny of automobiles, coming end of suburbia, rising prices of food, etc. For instance, the REAL cost of oil, for the USA, is much higher than officially admitted. When we internalize the military costs of oil wars and intelligence, the real USA cost of a barrel of oil is higher 110 dollars, not only 60+ dollars as nominally priced at present moment.

3 – In terms of ENVIRONMENTAL costs, oil has an even more terrible record: that of global warming, the most adverse of all risks humanity is facing this century. Not to speak of diesel fumes, tire dust (from oil most loved junior, the car), acid rain, spills, groundwater contamination and related evils.

So, IMHO, I believe EROEI, being itself different from cost, cannot be evaluated as an independent entity. To consider EROEI for oil, our dubious standard for evaluation of other alternative energy sources, in a context that takes economic, social and environmental costs in consideration, results in a more realistic evaluation that favors biofuels of high EROEI – like sugar cane ethanol in Brazil – very much.

Milton Maciel in Brazil

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Friday, December 01, 2006

EUROPE TO COOPERATE WITH BRAZIL TO PRODUCE ETHANOL IN AFRICA

Via EthanolBrasil, BioPact,

BioPact, a very complete web site devoted to the development of a “green energy pact between Europe and Africa”, picked up several news items on Ethanol Brasil, a new site by leading Brazilian agribusiness consultant Marcelo Coelho that discusses the Brazilian ethanol and sugar industry, and produced a very interesting write-up.

BioPact reports that, “according to Brazil's ex-minister of agriculture, Roberto Rodrigues, the governments of the Netherlands and the UK will be financing ethanol production projects in Africa, and will rely on Brazilian technology and expertise to do so. This is a classic example of how so-called 'South-North-South' exchanges can unlock Africa's biofuels potential. Rodrigues speaks in his function as the coordinator of the recently established Centro de Agronegócio (created by the Getúlio Vargas Foundation, Brazil's leading social science foundation), which has taken up bioenergy as one of its main research areas.

Interestingly, the European governments in question are not taking the easiest route because they want to support the development of biofuels in some of the continent's poorest and most troubled countries. Rodrigues says that with aid of these governments, war-torn Sudan will be one of the first countries to be invited to Brazil on a mission to learn about ethanol technologies and production strategies.

The Centro de Agronegócio wants to become a leading consulting organization and will be networking in the Global South to spread Brazilian knowledge and experience with biofuel production. The Fundação Getúlio Vargas had already established a large body of expertise in the sector, but is now concentrating it in a 'biofuels intelligence centre'.”

The article continues on BioPact.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Thursday, November 30, 2006

2006-07 BRAZILIAN SUGARCANE HARVEST SETS RECORD AT 475 MILLION TONS

Via Ethanol Brasil

Arab-Brazilian News Agency
November 30th, 2006

Sao Paulo – Brazilian sugarcane production for the 2006-07 period is expected to come in at 475.7 million tons, according to an assessment carried out by Cohab, the Brazilian National Supply Company (Companhia Nacional de Abastecimento). The current production is the largest in history and is 10.3% above the previous harvest, which totaled 431.4 million tons.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

ANHYDROUS ETHANOL IN BRAZIL AT LOWEST PRICE SINCE SEPTEMBER 05

Via Ethanol Brasil

After two months of stability, ethanol prices took a dip last week. The ESALQ/CEPEA index for anhydrous ethanol dropped 1.32%, listing a weekly average of R$0.85204 per liter (~US$0.40), before taxes. This is the lowest nominal value recorded since September 2005. Hydrous ethanol was at R$0.74903 per liter (~US$0.35), a drop of 1.25%.

An increase in supply put pressure on prices, even as mills headed toward the end of the milling season. Distribution centers, on their turn, did not show any great interest in picking up the excess.

All data are from CEPEA - Centro de Estudos Avançados em Economia Aplicada (Center for Advanced Studies in Applied Economics).

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

Monday, November 27, 2006

ROBERTO RODRIGUES, BRAZIL’S FORMER MINISTER OF AGRICULTURE, STARTS NEW VENTURE IN BIOFUELS

From IstoE Dinheiro Rural (a prime agribusiness publication)
November 2006 edition

(Note: Read interview with Roberto Rodrigues at the end of the article)

Go to original

Roberto Rodrigues, after serving for almost four years as Brazil’s Minister of Agriculture, is about to launch a new fund to finance projects in ethanol and biodiesel.

By Fabiane Stefano

The life of former minister Roberto Rodrigues is as busy as when he was in command of Brazil’s Ministry of Agriculture. In the past, as a government officer, Rodrigues met daily with businesspeople, representatives of rural associations, and farmers.

Now, he follows the same disciplined routine – but on the other side of the table. After almost four years as Minister of Agriculture, and a sabbatical of four months, Rodrigues is once again active, working as a university professor, community organizer, and, for the first time, as an entrepreneur in the agribusiness industry.

Mr. Rodrigues, an agricultural engineer, is setting up an investment fund to finance projects in ethanol and biodiesel. In an interview with ISTOE DINHEIRO RURAL magazine, Mr. Rodrigues gives details about his plan, which will use both Brazilian and foreign capital. “People who invest along with me have a good chance at success”, says the former minister. “I won’t let them plant sugarcane where it won’t grow. Nor will they sell ethanol at the wrong time. It’s very sound, and, at the same time, very, very serious”.

Rodrigues will act as a fund manager, bringing together the financial and technical areas. He will also give the final word on the selected projects. “I have been talking to Brazilian and foreign banks”, he says. He plans to launch the fund by the beginning of December.

The most attractive factor is the name of Rodrigues himself. In addition to having served as Minister of Agriculture, he is an agricultural engineer and is considered one of the main rural leaders in Brazil, having presided over organizations such as the Brazilian Rural Society and the Organization of Brazilian Cooperatives.

There is no shortage of parties interested in doing business with him. At the beginning of October, a director from Holland’s Rabobank sent the former minister an email stating that he was interested in coming to Brazil to discuss the fund.

“I can attract investors who are really committed to the project”, says Mr. Rodrigues.

For the time being, the former minister does not want to talk about numbers. But he hints that the fund should be launched with at least $200 million. “With $150 million, for instance, it would be possible to build a profitable plant, with a milling capacity of two million tons of sugarcane per year”.

The fund, however, won’t limit its activities to agroindustrial activities. It may also act in the acquisition of land and in participations in other ventures through stock acquisitions. Even a foray into stock exchanges has been contemplated. “I want to head a project that involves the entire productive chain behind agroenergy”.

In addition to his business venture, Mr. Rodrigues has taken up, once again, institutional and academic roles. He has been invited by the Federation of Industries of the State of Sao Paulo (Federacao das Industrias do Estado de Sao Paulo) – FIESP to preside over the organization’s Agribusiness Board (“Conselho Superior de Agronegocios”). The goal of the Board is to present proposals to state and federal governments to develop the agribusiness chain. In his very fist work meeting, at the beginning of November, Rodrigues will introduce Silvio Crestana, president of Embrapa, who will give a presentation on technology used out in the field. The idea behind the presentation is to convince almost a hundred Board members to approve the creation of a research fund with privately-owned monies.

Mr. Rodrigues will also head the recently-created Center for Agribusiness Studies (Centro de Estudos no Agronegocio) from Fundacao Getaulio Vargas (FGV), one of Brazil’s leading business schools.

The former minister’s presence at FIESP and FGV will create synergy between the two institutions. The ultimate goal is for FGV to carry out the studies that will allow for the execution of proposals coming from FIESP. Mr. Rodrigues will work pro bono in both capacities. “I don’t want to be the president of anything in the future”, he says.

It is precisely as a counselor that Mr. Rodrigues will participate in the Board of Directors of Agrenco, a multinational company that deals in grains and is currently expanding its activities in Brazil.

As an academic, Mr. Rodrigues will continue teaching a course on the management of cooperatives at Unesp, a university located in the city of Jaboticabal. Even in the days when he was Minister, the professor never stopped teaching the course, one that is always in high demand by students, in spite of its academic rigor.

Mr. Rodrigues has also taken up a position as a researcher for the Institute for Advanced Studies at USP, Latin America’s largest university, where he will coordinate multidisciplinary projects in geopolitics and economics. “The first project will analyze the true environmental impact of agriculture in the Amazon region”, he says.

Another field in which the former minister has taken up a role is the lucrative lecture circuit. As a gifted public speaker, Mr. Rodrigues will talk about agribusiness to companies and institutions, for a fee. “I was a bit hesitant to charge, because I have been doing it for free all my life”, he says.

Even with so many engagements in his new life as a private citizen, Mr. Rodrigues will continue to make frequent visits to Fazenda Santa Isabel, his farm in Jaboticabal. Dedicated to the production of sugarcane, the family property is managed by his son, Paulo, who is also an agricultural engineer.

At the farm, in a den full of memories of his rural upbringing and past, the former minister corresponds with people from all over the world. Every three months, he writes a letter to over one-hundred former classmates from his college days. The quiet of the farm also allows him to devote time to the four books he is currently writing. Two of them gather articles that he has written over forty years of a life dedicated to rural Brazil: one about agribusiness, another on cooperatives. Mr. Rodrigues has also been working on a novel. The theme? Agribusiness, of course, but from the point-of-view of four friends bonded by a secret. Yet another pretext to talk about his favorite subject.

INTERVIEW:

Roberto Rodrigues gave an exclusive interview to ISTOE DINHEIRO RURAL and spoke about his plans in the private sector, the largest of which has to do with a project in the sugar and ethanol industry.

The whole world is paying more attention to ethanol. Is agroenergy the wave of the future?

It certainly isn’t a fad. The central issue if the supply of energy. I was never a supporter of the idea that humanity should depend on a fossil product, one that is finite, poorly-distributed, and explored by a very small number of people. After World War I, civilization was built on oil. I protested that idea in the 70s. I have spent a lifetime defending agroenergy. And now I believe we are on the threshold of a new civilization.

What is Brazil’s role in the sector?

Brazil has real competitive advantages. I believe we can double the production of ethanol per hectare in Brazil. With climate and logistics, there is a 50% chance of a project working out. Land is no longer relevant. The other 50% have to do with technology and management. And we have technological standards capable of winning this war.

Can’t this rapid expansion in sugarcane lead to problems in the future?

What bothers me most is that the whole issue is seen by some as a passing fad. There are many foreign investors who want to be in Brazil. And that may make a poorly-executed project look better than it really is. A severe agricultural crisis has to do with abundance, not scarcity. Scarcity can be taken care of in six months. Abundance takes five years. In ten years, we will have a lot of ethanol. If the investor carries out a project on land with a low yield, he may go bankrupt. So he has to be very careful.

In the future, will the sugar and ethanol industry make as much money as now?

If things are done properly, the farmer may not make as much money, but he certainly won’t go broke. I have experienced two crises firsthand. And I can tell you: it is not easy. We cannot throw away the chance of developing a much larger, universal project, simply because of hastiness and unchecked ambitions.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.

ETHANOL FUEL ADVANTAGES DEMONSTRATED IN THE INDY 500

I worked with Tom MacDonald from April to August 2007. He has a long track record at the California Energy Commission with fuel ethanol, wit...