Last week I went for my annual trip to the London Docklands for the International Sugar Organization seminar about the economics of the sugar industry. Despite the world's economic problems, the sugar industry doesn't seem too gloomy. Although Michael Whitehead of Rabobank said that the capital-intensive nature of the sugar industry would cause problems -- you need to borrow a lot of money to build or upgrade a sugar factory (and to use it intensively to recover what you've spent), and farmers often need to borrow to invest in crop production -- he expected things to improve by 2010; and the evidence from previous recessions indicates that people still keep eating sugar when times are hard. Other speakers argued that continued growth in developing economies, resulting in rapid expansion of the middle classes in historically poor countries, would ensure that demand for sugar continued to increase.
As usual there was much interest in biofuels; the majority of speakers made some mention of the subject, and several concentrated on it. Despite recent falls in oil prices, Plinio Nastari of DATAGRO in Brazil predicted that in 2 years' time world ethanol production would (in terms of sugar equivalent) exceed that of sugar, and that the longer term trend would be for ethanol to get cheaper and oil more expensive.
Anne Ruth Herkes of BP said that although fossil fuel reserves weren't declining (I'd need to know more about what exactly she meant to comment on that), they were becoming concentrated in a small number of countries to the detriment of energy security. In any case, development of biofuels was necessary to help deal with the climate change problem. She argued that it was important not to reject good ideas along with bad ones; some biofuels could be good for the environment, the economy and society, so it was important to develop these and improve them further. Sugarcane (for ethanol) is currently the best feedstock, but biobutanol and lignocellulosic ethanol may offer greater benefits in future, enabling a significant proportion of the world's fuel to be obtained from less than 5% of crop land.
Biofuels are not the only product into which the sugar industry can diversify, as there is much else that can be made from cane, beet or sugar industry byproducts. For example, according to Mark Carr of British Sugar, his company's products include such things as topsoil, animal feed, tomatoes and electricity. One reason for their diversification is the reform of the European Union sugar regime, a perennial topic which came up again this year. Jos van Campen, representing European beet growers, said that after significant contraction in the European sugar industry, there were good opportunities for the remaining growers and factories. Nidhen Singh, representing the African, Caribbean and Pacific countries which have in the past had preferential access to the EU sugar market, was still worried about their ability to adapt to the new regime of lower prices and more competition.
My blog entry about last year's conference can be found here. More information about the issues discussed at the conference is available to subscribers to CAB Abstracts or its relevant subsets.
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