Yay! Florida’s Big Sugar is moving into ethanol! But wait, is it really?
Here’s the news: A $20 million ethanol refinery will soon be built next to Florida Crystals’ gigantic Okeelanta sugar mill in western Palm Beach County. And a U.S. Sugar Corp. subsidiary will break ground on a commercial-scale refinery in Clewiston this fall.
On the surface, Florida’s ethanol boosters—first and foremost our green governor and his cabinet, who have pushed a $60 million budget for ethanol promotion—should be relieved. Unfortunately, however, our ethanol cheerleaders in Tallahassee have a skeleton in their closet: They know that the state’s biggest sugarcane growers have not supplied—and will not supply—any sugarcane to ethanol refiners. This is a major drag if Florida wants to emulate the ethanol success story of Brazil, which makes the fuel mostly straight from sugarcane.
With the current state of technology, sugarcane—both chemically and environmentally—is the most meaningful feedstock for ethanol. Sugarcane yields eight to 10 units of ethanol energy per unit of fossil energy invested. Corn, which Florida’s ethanol boosters want to import from the Midwest, is a miserable feedstock. The starchy staple yields only between 1.3 and 1.5 units of ethanol energy for every unit of fossil energy invested. Cellulosic feedstock from mulch or switchgrass yields even less.
The abstinence of sugarcane suppliers has made large-scale ethanol production in Florida a long shot, at best. So will the two new refineries solve Florida’s feedstock problem?
U.S. Sugar will build its refinery in Clewiston next to—no, not a sugar mill but a citrus processing plant. The Clewiston refinery will be using citrus peel and other waste. The Okeelanta refinery will only process bagasse—basically, sucked-dry sugarcane waste, not fresh sugarcane—which the Brazilians use so efficiently. What’s more, in the case of Okeelanta, it’s not even Florida Crystals’ parent, Flo-Sun Inc., that will pay for and operate the refinery. The plant will be run by the University of Florida’s Institute of Food and Agricultural Sciences, which obtained a $20 million state grant for the purpose. In other words, we taxpayers are subsidizing Flo-Sun’s toe-dipping into the ethanol business.
Why is Florida’s Big Sugar so reluctant it needs to be coaxed with our money?
Protection. Or corporate welfare, as you might call it. Thanks to a wall built by Washington around U.S. sugar producers, imported sugar is held to 15 percent of U.S. sugar consumption. Our government not only allots sugar import quotas to foreign countries, it tells each U.S. state how much it’s supposed to contribute. Flo-Sun and U.S. Sugar share 80 percent of Florida’s allotment. The net effect of these protections is that the price of raw sugar paid to U.S. producers has been holding fairly steady at 25 cents, while the global market price recently dropped to just above 10 cents, in spite of the ethanol boom.
This explains why Brazilian sugarcane processors are eager to expand their ethanol business, while some of their U.S. peers are only performing taxpayer-funded publicity stunts.
But now a small part of U.S. sugar producers’ country-quota protection is falling away. As of Jan. 1, 2008, the North American Free Trade Agreement will allow Mexican sugar producers to export as much of the sweet stuff as they want to the United States.
So will this maybe coax Big Sugar into ethanol? Don’t hold your breath. Democratic Rep. Collin Peterson of Minnesota managed to insert a small clause into the gigantic 2007 farm bill, under which Flo-Sun and U.S. Sugar could reap millions of dollars in taxpayer funds under the halo of ethanol production—even though they aren’t going to make even a drop of ethanol from sugarcane.
Here’s how it works: Citing the Mexican threat, Peterson proposed to raise the minimum price under which the government must start buying U.S.-made sugar from 18 cents per pound to 18.5 cents. And he adds an ethanol twist: To get rid of what could be mountains of sugar, the amendment—already passed by the House—tells the federal government to resell this surplus to ethanol processors, at a loss. These processors will then mix the sugar with corn to make fuel.
This procedure makes about as much sense as the French deciding to run their Renaults on red wine and fermented baguette because their booze can’t compete with Cabernet imports from California.
The Senate has yet to vote on the Ag bill. But as I am writing this, Iowa Sen. Tom Harkin, the Democrat in charge of the Senate Agriculture Committee, said he supported Peterson’s measure.
If the Subsidize-Our-Hurting-Sugar-Corporations law passes, Big Sugar’s disinterest in making ethanol from sugarcane is guaranteed for many more years to come.
Meanwhile, the U.S.-Brazilian Ethanol Alliance signed in March—and the perspective of the United States opening its market to imports from countries with free-trade agreements—put Florida’s Brazilian competitors into overdrive to promote cultivation of sugarcane in other countries. In August, a Brazilian delegation signed a series of agreements with the Mexican government to promote sugarcane production along the Gulf Coast. In other words, Brazilian ethanol corporations want to turn Mexico, which already has a free trade agreement with us, into a sugarcane ethanol export platform to the United States.
It’s rather doubtful Florida ethanol made from wood chips—or worse, from corn imported from Iowa—could ever compete with Brazil’s much cheaper ethanol from sugarcane without taxpayer subsidies.
By the way—guess who nudged the “Ethanol Promoter in Chief,” George W. Bush, into this agreement with Brazil? His little brother, Jeb Bush. Co-chair since 2006 of the Interamerican Ethanol Commission (IEC), which has its offices in Coral Gables, the younger Bush has long advocated the United States drop its import taxes on ethanol. That’s fine. But Jeb’s organization hasn’t said peep about dropping the protections for Florida sugar producers.
Not only does the IEC fail to mention Florida’s skeleton in the closet, Jeb’s group actually seems to write off domestic ethanol production from sugarcane entirely. In its June newsletter, the organization advocates massive ethanol imports to Florida, even dropping our 57 cents a gallon import duty on ethanol.
It looks like our leaders want to turn everything south of our border into a gigantic sugar plantation, and replace our dependence on oil imports with a dependence on ethanol imports.
Great news: As our local economic real estate engine is sputtering, area business leaders seem to be warming up to the idea of doing business beyond our borders. A couple of months ago, The Greater Sarasota Chamber of Commerce celebrated the first year of its International Business Council.
What got me particularly excited is that the group celebrated its anniversary by bringing in a speaker about Cuba. And it comes right in time: There’s change in Miami, and that is triggering change in Washington. Congress has for the past seven or eight years shown inclinations to get rid of the soon 50-year-old embargo, despite a very ideological presidency and its handlers in Congress. But now, presidential politics are changing as well. Sure, we have Hillary Clinton, John McCain, Rudy Giuliani, Mitt Romney and Joe Biden spewing fire against the Castro brothers when campaigning in Miami and New Jersey. That’s old news. The new news is that three candidates—one of them a frontrunner—are actually campaigning from an anti-embargo platform.
The face of change is Barack Obama. In response to a question last summer, Obama famously said he would be willing to meet with the leaders of what our current administration defines as “rogue” countries such as Cuba. And just before a Miami visit in August, he very consciously announced he wanted a lifting of the travel ban for Cuban Americans.
Obama is not suicidal. He is taking a clever risk, after realizing that Cubans in Miami are changing. In fact, George W. Bush almost lost Miami in the 2004 presidential elections because he imposed harsher travel restrictions. Under Bush’s new rules, Cuban Americans can legally visit family on the island only once every three years instead of once every year. Not surprisingly, this didn’t go down well in Miami.
One of the Miami politicos supporting Obama is Democrat Joe Garcia, a former executive director of the Cuban American National Foundation, the same exile group that allegedly spent millions of dollars in the 1990s to get Fidel Castro killed.
What’s even more amazing is that Obama not only counts a former leader of the Cuban American National Foundation among his fans—Cuba’s foreign minister also cautiously welcomed Obama’s Miami moves.
And that’s without mentioning mainstream Americans. In a recent Zogby poll, 58 percent said they felt the United States should be talking with Cuba about their future relationship, 56 percent said it is time to remove the travel restrictions and to end the embargo.
Christine Jennings and Vern Buchanan, take note.
Talking about building bridges, we urgently need one with Venezuela. And what would be closer to Sarasota than the cultural track? I’d love to see someone here try to invite the Simón Bolívar Youth Orchestra. It won’t be easy to pull off, because this government-sponsored elite orchestra reaped rave reviews during its summer tour of Europe. And the orchestra’s 26-year old director, Gustavo Dudamel, is being hailed as the world’s next Karajan or Barenboim. Bring ’em on!
Johannes Werner is a Sarasota-based business journalist who has worked in Europe, Mexico, the Caribbean and the United States. He is the editor of Cuba Trade & Investment News and hosts the Florida-Caribe radio show on WSLR 96.5 FM. His column, “Outside In,” won the Florida Magazine Association’s first-place Charlie Award for best column in a trade/technical magazine in 2007.