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Ceres pulls back from 'challenging' Brazil bioenergy market

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Crop developer Ceres blamed "serious challenges" from a low oil price, and a "struggling" Brazilian economy, for a decision to switch away from research into new generation bioenergy crops to focus on feed and sugar cane.

The US-based biotech group - which earlier this year said that "economic challenges" in Brazil's ethanol industry were prompting it to investigate other markets – said on Friday it was extending the process, meaning job losses and a quest for extra funds for the Brazilian operation.

Ceres, which has been developing sweet sorghum as a biofuel feedstock in a tie-up with cane-to-energy giant Raizen, said that its latest move would see it "further align expenditures" towards other sectors, including forage, and genetically modified sugar cane.

The shake-up represented "an important step in the transformation of our business as we refocus on our strengths in agricultural technology and direct our attention to markets being fuelled by global prosperity growth", said Richard Hamilton, the Ceres chief executive.

"Bioenergy markets have continued to face serious near-term challenges due to low oil prices, the struggling Brazilian economy, delays in second generation refining technology and unfavourable government policies," he added.

Sugar cane advances

The company, which originally focused on the use of sorghum and switchgrass as ethanol feedstocks, said that it now considers sugar cane "a more attractive use of capital".

"The company's current restructuring plan is intended to further align expenditures toward improved forages for dairy and meat production and biotech traits for sugar cane and other crops," Mr Hamilton said.

While sugar cane, like sorghum or switchgrass, is a raw material for ethanol, besides for sugar itself, Ceres is being encouraged to stick with the crop by a Brazilian government grant and the progress it has already made.

"Our advances in sugar cane biotechnology and compelling field trial results are making Brazilian sugarcane a more attractive use of capital," he said.

Ethanol plant sales

Brazil is the world's second largest ethanol producer, thanks to its abundant sugar production, and fuel ethanol use, either in its pure from or blended with gasoline, is extremely widespread.

But all has not been well in the global ethanol markets, into which Brazil is the largest exporter.

The news from Ceres follows rumours that Brazil's state run oil company Petrobras, which has the dubious honour of being the most indebted company in the world, is poised to sell its unprofitable sugar cane ethanol plants.

Ethanol prices have been falling as gasoline, into which it can be blended as a road fuel, becomes cheaper, thanks to the low price of crude oil and a weak global economy.

Cheaper gasoline means less incentive to blend.

Brazil's state-owned and heavily regulated road fuel industry has historically come under government pressure to keep gasoline prices down, and quell inflation, although the administration of Dilma Rousseff has in the past year made tax and blending concessions to encourage ethanol use.

By Agrimoney.com

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