As well as being a foodstuff, sugar is an important source of fuel. That’s because it can be converted into ethanol, which in turn can be used as a petrol substitute. Brazilians have been using it in their cars since the 1970s. Indeed, by law, all cars sold have to be able to run on fuel that is at least 18% ethanol, and nine out of ten can run on pure ethanol.
Up until now, Brazilian car ownership has been limited. In 2011 there were only 259 cars per 1,000 people. This is less than half the ratio in the UK (525) and just over 30% of that of the US (812).
But with the Brazilian middle class growing, car sales have been booming. The latest figures suggest that total sales were at record levels in 2012. More cars on Brazil’s roads mean that more ethanol – and therefore more sugar – will be consumed.
Another major boost is that Brazil’s state oil company has decided to raise the price of petrol. This will in turn allow ethanol producers to raise their prices. On top of that, the state has said that it wants the percentage of ethanol used in petrol to go from 20% to 25%. Because Brazil is so important as a producer, this should erase the global surplus completely.
However, up until now, the US has focused on a version of ethanol that uses corn grown in the US, for the simple reason that it’s a handy bribe for the powerful US agricultural lobby.
But this policy has been criticised heavily for driving up food prices. Bodies such as the United Nations aren’t happy that corn is going inside the tanks of SUVs in America, rather than the stomachs of those in developing countries.
In response, the US Environmental Protection Agency (EPA) has been trying to make sure that some of the ethanol used comes from non-corn based sources. In practice, this means sugar-based ethanol.
Of course, this move is not popular with farmers in the Midwest, and there have been moves to get it reversed. However, it’s clear that the trend is towards sugar – not corn-based – ethanol.