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Ethanol
The first half of 2008 has been characterized by high feedstock prices, high oil prices, and intensifying debates on food vs. fuel and the environmental credentials of biofuels from certain substrates.
Oil at over US$ 130/barrel has raised gasoline and ethanol prices in the US thus moderating the impact of rising corn prices (currently US$6/bushel) on processors margins. The US market is highly dependent upon what happens to oil prices. If oil prices remain high US ethanol imports will pick up and direct spot sales to US (paying the full tariff) could be attractive. Any further increase in corn prices could discourage processors from operating at full capacity, thereby prompting price rises until such time as corn prices re-adjust allowing output to recover.
The sharp fall in sugar prices and a record cane crop in Brazil points to a high proportion of cane to ethanol in Brazil and thus lower ethanol prices. Some analysts argue that rising oil prices and falling sugar prices improve the prospects for global ethanol trade in 2008.
In the EU prices may follow a downward trend (as in Brazil) but remain high enough to stimulate imports to meet a growing supply shortfall arising from mandates.
Ethanol