Brazil Ethanol Increasing Sugar Prices

Cindy Zimmerman

Demand for ethanol in Brazil is helping to increase sugar prices, according to a Bloomberg article sent to us by alert reader Erick Erickson of Holdrege, NE (Thanks, Erick!). Of course, it’s not entirely because of the demand for ethanol. Part of it has to do with the hurricanes here in the US that devastated sugar cane crops in Louisiana and Florida last year – and a big drought in Thailand. So … yeah, they’re making more ethanol in Brazil, but it’s basically the law of supply and demand here that is driving up sugar prices to a 24 year high. Basic Economics 101. So, relating that to the last post about increased ethanol production leading to world hunger … I would venture to say that it may (and hopefully will) increase the price for corn, but that is a good thing for farmers who – unlike most producers of goods – don’t set their own prices. They just have to take the best price they are offered at the market. The main reason for corn farmers to promote ethanol production and use is to increase demand for their product and ultimately the price they receive. It’s a bonus that ethanol is good for the environment too.