WASHINGTON - Making ethanol from sugar could be profitable with the current high demand for the gasoline substitute, but it probably won't be for long, the Agriculture Department said Monday.
At recent spot market prices of $4 per gallon, converting sugar cane, sugar beets, raw sugar and refined sugar to ethanol is profitable, the department said in a report. However, it added that those spot market prices are expected to drop as more ethanol is produced from other sources, chiefly corn.
"At this high, unusual price, I can conclude that it's economically feasible to produce ethanol from sugarcane and sugar beets," said the USDA's chief economist, Keith Collins, at a news briefing. "However, I would not want to pour concrete based on $3-a-gallon ethanol prices" because the futures market predicts ethanol will drop to $2.50 by next year.
At that price, converting sugar to ethanol would not be economically feasible, Collins said.
U.S. Rep. Collin Peterson, D-Minn., ranking Democrat on the House Agriculture Committee, said Monday the report confirms what he has been saying all along: "Ethanol produced from sugar in the United States is not cost-effective."
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As the USDA study suggests, it takes 5 tons of sugar to produce the same amount of ethanol made from 1 ton of corn, Peterson said.
At the end of the day, ethanol made from sugar cane and sugar beets would cost between $2.35 and $2.40 per gallon in the United States, while ethanol produced from corn costs only $1.03 to $1.05 per gallon, he said.
"To make sugar competitive in U.S. ethanol production, we would have to dismantle the current sugar program, which would drive our growers out of business, or offer big subsidies to reduce the price of sugar," Peterson said. "Neither of those options will have much support in Congress or in rural America."
Sen. Norm Coleman, a Minnesota Republican who has championed the idea of turning sugar into ethanol, said in a statement, "This study states producing ethanol from sugar is profitable at current prices, indicating a properly designed policy could serve as a complement, not a substitute, to the farm bill's existing sugar program."
Moorhead-based American Crystal Sugar, with 2,900 farmer-shareholders, is studying the role it might play in providing sugar for ethanol production, said company public relations spokesman Jeff Schweitzer.
"At this point we're providing input to the USDA," Schweitzer said. "We're really just taking a wait-and-see attitude to see what happens. The company is not ruling it in or out at this point."
He said American Crystal President Jim Horvath would have to address specifics of a report released Monday by the USDA. Horvath was traveling and unavailable for comment, Schweitzer said.
The company realizes that certain mechanisms must be in place for American Crystal to make such a venture worthwhile, he said.
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With some investment, producing ethanol is something American Crystal could do. The question is if it will be a viable market for sucrose, Schweitzer said.
The report was put together through a cooperative agreement between USDA and Louisiana State University.
Sugar in the United States is made from two sources: beets in some northern and western states, and cane in a few southern states and Hawaii.
Minnesota is the largest producer of sugar produced from beets, while Florida leads in sugar from cane, according to the American Sugar Alliance, a trade group.
Lawmakers from those states have been pushing sugar-to-ethanol, citing the model of Brazil, which produces ethanol made from sugar cane. Critics note that sugar is much cheaper in Brazil.
Associated Press writer Frederic J. Frommer and Forum Business Editor Craig McEwen developed this story
