Ethanol From Corn Vs. Ethanol from Sugarcane: Ethanol from United States Vs. Ethanol from Brazil

The U.S. heavily taxes ethanol from Brazil in order to keep it from competing with corn ethanol that we grow and process here in the United States. To be fair the United States imposes a 54 cent per gallon tariff on all imported ethanol, it doesn’t specifically target Brazilian ethanol. The reasoning behind this tariff is that if foreign ethanol was introduced to the United States at market value the ethanol program at home would be undermined and could not compete with the lower cost of ethanol produced from sugarcane and other high sugar crops. This would effectively kill the corn ethanol programs that are currently in their infant stages.

Ethanol produced from sugarcane is cheaper to process because it doesn’t need to make the transformation from carbohydrates to sugar, which is then fermented to make ethanol. Otherwise the ethanol is basically the same. There are many other factors to take into account that give countries such as Brazil an edge on the ethanol market.

Brazil has the largest amount of open land that is used for or could be converted to farm land. Brazil also has a very low cost of labor. It is suspected that slave labor is even in use in some of the remote area’s of the Amazon. A third advantage that Brazilian farmers have on the ethanol market is the tropical climate which allows it to be highly effective at sugarcane production. Given all of these advantages the American farmer would find it difficult to compete in the ethanol market if the ethanol restrictions were removed.

Even with the tariff in place, Brazil can still ship ethanol to the United States and make money in cases of a particularly good year in sugarcane production. In an effort to keep Brazilian ethanol from flooding the U.S. market the United States has imposed a 7% maximum on imported Brazilian ethanol. This means that Brazil cannot import more than 7% of the ethanol that was produced in the United States the previous year.

President Bush visited Brazil in the first leg of his 2007 South American tour. During this visit he spoke with the Brazilian President Luiz Inacio Lula da Silva about the restrictions placed on Brazilian ethanol. President Bush has considered removing some restriction on imported ethanol in an effort to lower the price of gasoline in the United States. This has been met with great opposition from members of the congress who want to support American farmers at home.

I do not believe that it would be a good idea to open the United States up to a flood of imported ethanol because this would only make us dependant upon foreign ethanol instead of foreign oil. I do believe that if the United States wishes to grow our ethanol industry it will be necessary to make changes in the crop that we use to produce it. Currently nearly all of the ethanol the U.S. produces comes from corn. If the ethanol industry pushed more toward extracting ethanol from crops such as sugarcane and soy beans we may be able to lower the production costs and raise the efficiency of ethanol production at home.

Reference:

• yaleglobal.yale.edu/display.article?id=6817