President Bush and Brazilian president Luiz Inacio Lula da Silva met at the Camp David presidential retreat this weekend(for the second time in three weeks) to discuss trade and ethanol.

Pres. da Silva hopes to advance a biofuels alliance and help break a deadlock in world trade talks known as the Doha Round, which were launched in 2001 and stalled last year.  Developing countries were upset because rich nations wouldn’t make significant cuts in farm subsidies and demanded greater access to markets in the developing world.  No major breakthrough on those talks was expected at Camp David.

“What the two presidents want to review is where we are and what needs to be done and what President Bush and President Lula can do to move forward,” said Dan Fisk, the National Security Council’s senior director of Western Hemisphere affairs. 
The two leaders’ talks on ethanol was expected follow up a memorandum of understanding to promote international ethanol that the two nations signed when Bush visited Brazil on March 9.  Fisk said the two hoped to announce a handful of Caribbean and Central American nations that will be the beneficiaries of pilot programs for biofuels development.
Last Friday, Silva reiterated Brazil’s position that the alternative fuel will not gain traction worldwide unless the U.S. drops a 53-cent-per-gallon tariff on Brazilian ethanol: “The subsidies provided under America’s corn-based ethanol program have spurred an increase in U.S. cereal prices of about 80%,” Silva wrote in The Washington Post. “This hurts meat and soy processors worldwide and threatens global food security.”
The promotion of ethanol could eventually help wean the U.S. off its need for foreign oil, officials say, lessening the energy dependence on volatile Middle Eastern nations and Venezuela, whose President Hugo Chavez has long been a political thorn in the Bush administration’s side.
Teaming up with Brazil on the promotion of ethanol, however, hasn’t pleased everyone.  U.S. Corn farmers don’t like the idea of the government helping Brazil’s industry, which they see as a competitor.  Lawmakers from corn-growing states have registered their complaints with Bush.

Growers intend to plant 90.5 million acres of corn for all purposes in 2007, up 15% from 2006 and 11% higher than 2005.  If these figures are realized, this would be the highest acreage since 1944, when 95.5 million acres were planted for all purposes.

 
Expected acreage is up in nearly all States as favorable corn prices, caused by increased demand from ethanol producers and strong exports sales, are encouraging farmers to plant more acres to corn.  The increase in intended corn acres is partially offset by lower expected acres of soybeans in the Corn Belt and Great Plains, and fewer expected acres of cotton and rice in the Delta and Southeast.

 
Illinois farmers intend to plant a record high 12.9 million acres of corn this spring, up 1.60 million acres from last year.  North Dakota and Minnesota growers also expect to plant record high corn acres, up 910,000 and 600,000 acres.

 
Corn farmers in the 10 major corn producing States (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin) intend to plant 69.5 million acres, up 12% from the 62.2 million acres planted last year.  Iowa continues to show the largest corn acreage at 13.9 million acres, up 1.30 million acres from last year.
 

The Alexandria Daily Town Talk reports that the next big alternative fuel crop and boon for Louisiana farmers may very well be sweet sorghum, a cane-like plant with a high sugar content grown primarily for forage, silage, and sugar production.

 
Lee McClune, president of the Iowa-based Sorganol Production Co., has presented research to the AgCenter from Iowa State University that shows sweet sorghum can produce more than six times the ethanol, about 3,037 gallons per acre, than the 450 gallons per acre produced from corn.  Sweet sorghum also can be grown and turned into ethanol a lot cheaper than corn, McClune said, returning about $1,000 more per acre than corn.

 
McLune explained that Louisiana’s sub-tropical climate is ideal for growing sweet sorghum, which, he said, can be grown in Louisiana 9-10 months during the year, compared with 4-5 months in midwestern states such as Iowa. 

 
AgCenter engineers, however, are waiting to see if the technology McClune is touting lives up to expectations: “I have to take a much closer look at the technology. If it can do what he claims, it’s a very promising thing,” said Dorin Boldor, an agriculture engineer with the LSU AgCenter in Baton Rouge.

 
Sugar cane is better for ethanol production than both sweet sorghum and corn, with varieties producing as much as 3,299 gallons of ethanol per acre. It cannot, however, be effectively grown in the state much farther north than Alexandria.

 
Sweet sorghum, on the other hand, can be grown all over the state, and research is needed to determine which variety of sweet sorghum grows the best in central Louisiana.  A smaller variety of sorghum, used in animal feed, is already being grown by Louisiana farmers.

Farias, a major northeast Brazil sugarcane group, has signed a protocol of intentions with Chinese investors to build ethanol mills that could process up to 10 million metric tons of sugarcane per harvest, according to a report in local Valor Economico newspaper on Monday.

The Chinese companies interested in investing in Brazilian ethanol mills could be Jilin Fuel Ethanol, Henan Tianguan, Anhui Fengyuan Bio-Chemical and Heilongjiang China Resources Jinyu, which together produce 1 billion liters of ethanol per year, said the report. Possible investments could hit 1.2 billion Brazilian reals, with two greenfield projects currently being analyzed in the northeast state of Maranhao, said the report.

The Farias group currently has five operational mills and a new Goias mill expected to enter operation for the 2007-08 harvest. The group crushed roughly six million metric tons of cane last season, and by 2010, the Farias group plans to hit a crush capacity of just under 15 million metric tons; by 2015, the group plans to process 32 million ton of cane.

Despite the ongoing drama of the war in Iraq and the firings of U.S. attorneys, the president is focusing in energy, converting switchgrass and wood chips into ethanol.

 
The president is scheduled to visit a U.S. Postal Service plant today, where he was to stand near vehicles that run on alternative fuels and hail them as a way to reduce reliance on oil.  He also touted his energy plan on a Midwestern tour of auto plants last Tuesday.

 
“We want people to know that we’re doing a lot on energy, and we think energy is an issue where there’s an interest in getting it done on the Hill,” said Kevin Sullivan, the White House communications director. “The only way to break through and build some momentum is to do two or three events in a short period of time.”

 
Karlyn Bowman, a public opinion analyst from the American Enterprise Institute, a conservative think tank in Washington, says it is not surprising that Bush is spending so much time on energy.  Energy, especially the shift to alternative sources of fuel, is a hot topic in America today.

 
Bush wants to reduce U.S. gasoline consumption 20% over 10 years, so he promotes cars that run on batteries or on alternative fuels such cellulosic ethanol, which can be produced from cornstalks, woodchips and switchgrass.

 
After announcing his plan, he first went to a high-tech ethanol lab in Delaware to focus on the science.  Next, he toured Ford and GM plants in the Kansas City area to show people that hybrid vehicles are becoming sleeker and more common.  Last Tuesday, he was showcasing how big delivery companies use alternative fuel technology.

 
But is Bush coming off as oblivious or tone-deaf, especially since Americans (and Congress) are paying attention to other issues?  Sullivan says Bush won’t let that happen.  On the day Bush toured the auto plants last week, for example, he returned to the White House earlier than expected to give a statement on the Gonzales matter and take questions from reporters.

Cosan SA vice president of finances, Paulo Diniz, said earlier this month that rising prices for ethanol assets discourage acquisitions and may refocus the attention of Brazil’s largest sugar and ethanol group toward organic growth.
“The market is quite heated up in terms of prices…Acquisitions have always been central for our growth,” Diniz said.  He also added that current prices are making the company rethink its strategy: “We have been talking with some potential (acquisition) targets. But we’re (now) evaluating much more seriously internal expansion (of existing distilleries) and greenfield projects.”
Last month, Cosan had lost a bid for the control of Cia. Acucareira Vale do Rosario, the third-largest sugar milling group in Brazil. The company recently reported a net profit of 63.4 million Brazilian reals ($30.3 million) for the quarter ended Jan. 31, reversing a net loss of BRL41.2 million in the same period a year ago.

U.S. company Tampa Energy and partners are looking to invest roughly $50 million in a new ethanol dehydration plant to be based in the Dominican Republic and to supply the U.S. market, the company’s chief executive officer Arthur McDonnell told Dow Jones.

 
“The plant should start operating in the 2008-09 harvest, perhaps June,” McDonnell said.

 
In the first two years, the plant’s processing capacity is expected to be roughly 50 million gallons (190 million liters) per year, with plans after that to perhaps double capacity, he added. Ethanol exported to the U.S. via Caribbean and Central American countries currently enjoy a tariff-free quota of up to 7% of the U.S. market, under a trade agreement known as the Caribbean Basin Initiative (CBI).  Once that quota is exceeded, companies have to pay a hefty 54-cent-per-gallon U.S. ethanol tariff if the ethanol uses imported feedstock.

 
Companies currently exporting ethanol tariff-free to the U.S. via the CBI include U.S. multinational Cargill Inc., London-based trading company ED&F Man, and leading Brazil ethanol exporter Coimex.  Companies such as Coimex, however, point out that they are already looking at investing in local feedstock production in the region, since ethanol sourced from local feedstock have no quota set for tariff-free sales to the U.S.

 
Tampa Energy and its partners are also looking to build a 130,000 metric ton plant in the Caribbean that will produce gasoline additive ETBE, or ethyl tertiary butyl ether, which uses ethanol as a feedstock.

Silas Oliva Filho, manager of ethanol and oxygenates at Petrobras, said during a sugar and ethanol conference in Sao Paulo yesterday that the Brazilian state-run oil firm would enter the U.S. ethanol market for the first time in 2007 but did not give any volume estimates.

 
The U.S. is Brazil’s top ethanol export market, and Petrobras said it should export around 850 million liters of ethanol in 2007, which includes markets like Nigeria and Venezuela and test volumes to Japan, expected to be around 20 million liters.

 
Filho also said that Petrobas would start construction of a $750 million ethanol pipeline as early as August.  The pipeline will take about two years to complete and have the capacity to transport 8 billion liters of ethanol.  Filho explained that the pipeline “is a big risk for the company, because no one knows for sure when the market will come. It could take a few years after construction before we really have the (ethanol) buyers.”

 
Japan has been in discussions since 2001 with Brazil about signing a long-term ethanol import contract to help trim rising carbon emissions in a time of accelerating climate-change worries.  Talks have dragged, however, as both Japan’s public and private sectors have fretted about the best way to ensure a stable supply of the biofuel to the country’s fuel market.

U.S. Senator John Thune (R-S) has urged federal officials to give quick consideration to a proposal for using a 20% blend of ethanol in vehicles.

 
About half the gasoline sold in the nation is now a blend of 10% ethanol and 90% gasoline (or E10), but Thune urged the EPA to prepare for quick certification of a blend of 20% ethanol and 80% gasoline.

 
Minnesota will be requesting a waiver to allow the use of 20% ethanol in fuel, Thune said. When the EPA considers the Minnesota request, it should look at approving a broader standard that would allow the fuel in other states if those states and the fuel industry decide to use a 20% blend, called E-20, he said.

 
“We’ve got to continue to grow the demand for and usage of and develop the ethanol market for all the reasons everybody agrees are important, energy independence, clean air and obviously a good economy in the Midwest,” Thune said.  Thune said the EPA will have 180 days to respond to the Minnesota request, but he hopes the agency will conduct its review quickly.

 
Roughly half the corn grown in the nation is expected to be used to produce ethanol this year.  Lisa Richardson, executive director of the South Dakota Corn Growers Association, said the ethanol industry needs the proposed change to increase demand for ethanol.

The USDA reported last week that the ethanol industry’s corn demand is raising livestock costs and will result in increased beef, pork and chicken prices.

The USDA also reports that ethanol is consuming 20% of last year’s corn crop and is expected to use 25% of this year’s harvest, driving up the price of corn. The average price of corn is $3.20 a bushel, which is $2 up from last year.

Higher feed costs will reduce meat and poultry production. The National Chicken Council reported that the price of corn has forced a 40% increase in the cost of feeding chickens, and poultry will soon cost more at retail.

Deputy Agriculture Secretary Chuck Conner said USDA is closely monitoring corn supply and demand, which is likely to force farmers to plant more acres of the crop: “We do have confidence in the marketplace’s ability to react.  We believe producers are seeing the market saying, ‘I need more corn, not only for ethanol, but for our feed needs in this country.”

The USDA announced that a mere 4.1 million acres will be withdrawn from the Conservation Reserve Program in the next four years, ruling out the possibility that it be used for extra corn production.  The CRP program pays landowners to take out of production land that is highly erodible or otherwise environmentally sensitive.

Meanwhile, USDA — urged by NCC, the National Pork Producers Council, American Meat Institute, National Turkey Federation, National Cattlemen’s Beef Association, and National Milk Producers Federation — has formed an ethanol panel to address the effects of ethanol and other biofuels on animal agriculture.