Market dynamics in agriculture and biofuel business leads to serious challenges for ethanol producers worldwide.For the last two years, the international sugar price has decreased by more than 20%, 8% of which were realized in the second half of 2014 alone. On the global markets there is a serious drop in the prices of sugar crops (sugarcane, sugar beet and corn), which are essential raw materials for ethyl alcohol (ethanol) production.
This trend, which has been going on for the last few years, forced the producers of these crops (mainly in Brazil and the USA) to decrease their production. That is why, for the first time in five years it is expected that the harvest of 2014-2015 will result in a deficit on the sugar market of 2 - 2,5 millions of tons.
According to analysts, the drop in raw materials' prices will not have a very positive effect on spirit producers because due to the drop in sugar prices many producers of "white gold" switched to ethanol production, which considerably increased the competition within the sector and the supply of ethyl alcohol for industrial purposes, thus pushing ethanol prices down.
The dramatic decrease in oil prices in the last few months restricted the market niches for the sugar crops-sugar-spirit business sector even more, due to the decreased demand of ethyl alcohol which is used as a substitute to gasoline.
Source: Agra Europe and Agra Informa (subsidiaries of INFORMA GROUP), www.agra-net.net (World Ethanol and Biofuels Report).
