energy.agwired.com

Brazil makes almost all of its ethanol from sugar, and some US lawmakers in sugar-producing states would like to see more of that here. The question is whether it would be economically viable to do so.

AP reports the U.S. Department of Agriculture is expected to issue a long-awaited study around July 1 on the viability of converting sugar into ethanol. Lawmakers from Minnesota, which produces sugar beets, and sugarcane leader Florida hope for a positive answer.

“It would be absurd in 10 years if we’re doing 60 billion gallons of ethanol, and the only crop in America that’s not participating is sugar,” said Sen. Norm Coleman, a Minnesota Republican and one of Congress’ leading champions of sugar-based ethanol. Sen. Bill Nelson, a Florida Democrat, tried unsuccessfully last year to get the Senate to require refineries across the country to use 100 million gallons of sugar-based ethanol a year.

“It’s not going to happen unless there is a push from Congress with the incentives,” Nelson said, short of a major disruption in the oil supply to the U.S.

Coleman and Nelson are backing legislation sponsored by Sen. Evan Bayh, D-Ind., that would encourage the use of renewable fuels, including the 100 million-gallon mandate for sugar-based ethanol.

Just a few weeks ago, the media was focused on there not being enough ethanol to meet the demand with the phase out of MTBE. Now we’re seeing articles questioning if we might be heading toward producing too much ethanol.

Forbes’ Dirk Lammers writes “some analysts say the burgeoning industry faces risks of oversupply, volatile commodity prices and a dependence on government subsidies.”

A Bloomberg News piece by Joe Carroll says “Within two years, planned expansion by ethanol producers will push U.S. supplies past demand, according to Standard & Poor’s.”

The dire predictions come on the heels of VeraSun’s shining initial public stock offering last week raised $419.8 million. The stock skyrocketed to $30 by market close on Wednesday. The company‘s shares fell in the days afterward to close at $25.25 Friday. Shares of Bill Gates’ investment Pacific Ethanol have fallen 43 percent in the past month. Meanwhile, two other ethanol companies, Hawkeye Holdings Inc. and Aventine Renewable Energy Holdings Inc., are planning their own initial share sales later this year.
“Investors poured $14.3 billion into U.S. ethanol stocks in the past 12 months, according to data compiled by Bloomberg.”

Like anything else, the key is moderation – too much expansion too fast could ultimately wind up hurting the inudstry. But, also like anything else, there’s a rush to cash in while it’s hot.