FACING ENERGY SECURITY IN THE FACING ENERGY SECURITY IN THE AMERICAS THROUGH AGROENERGY AMERICAS THROUGH AGROENERGY

SOURCESSOURCES Roberto RodriguesWashington / USA - October, 28th 2008 - OAS

2221/04/2321/04/23

AGRICULTUREAGRICULTURE

Source: Alan MacDiarmid, em São Carlos – SP

The ten biggest problems for theThe ten biggest problems for thehumanity in the next 50 yearshumanity in the next 50 years

Energy Education

Water Democracy

Food Population

Environment Disease

Poverty Terrorism & war

3321/04/2321/04/23

Changes in the demandChanges in the demand::

Sustainability:Sustainability:

Economical, social and Economical, social and

environmentalenvironmental

- flavor- flavor

- quality- quality

- traceability- traceability

- health- health

- environment- environment

- organic products- organic products

TrendsTrends

TrendsTrends

Food DemandFood Demand(2000 – 2025)(2000 – 2025)

+ 62.0%+ 62.0%Source: Bourlaug, N., Agroanalysis, Vol. 27, nº 03 (março/2007)Elaboration: GV Agro

Demographic trends:Demographic trends:

Increase.%2000-2025

Part.%2025

China 13.2% 17.4%

India 36.6% 16.8%

Africa 68.9% 15.4%

World 33.9% 100%

5521/04/2321/04/23

Projection of the urban and rural population in the Projection of the urban and rural population in the worldworld

Source: ONUElaboration: GV Agro

TrendsTrends

RuralRural

UrbanUrban

billi

on o

f pe

ople

billi

on o

f pe

ople

6621/04/2321/04/23

Evolution of GDP Evolution of GDP (2006-2013)(2006-2013)

Source: FMI Nota: PIB a preços de 2005

TrendsTrends

- World: 4.6% a.a

- Countries of G-7: 2.2% a.a

- Developing countries: 7.1% a.a

- World: 4.6% a.a

- Countries of G-7: 2.2% a.a

- Developing countries: 7.1% a.a

Participation in the world GDPParticipation in the world GDP

Países do G-7Países do G-7Countries of G-7Countries of G-7

59.5% 53.6%59.5% 53.6%

Others devolopedOthers devoloped

15.8% 15.6%15.8% 15.6%

Developing countriesDeveloping countries

24.7% 30.8%24.7% 30.8%

20062006 20132013

7721/04/2321/04/23

World: offer and estimated demand for World: offer and estimated demand for foodfood

Source: FAO (2003) Elaboration: AGE – MAPA ¹ all of consumed meats

(in million tons)(in million tons)

Source: USDA (out/08)

Global stockpilesGlobal stockpiles

Elaboration GV Agro

Global stocks of grainsGlobal stocks of grains

Source: USDA Note: * Soybean, Corn, Wheat and Barley. In thousand tons Elaboração: GV Agro

Production x Consumption*:Production x Consumption*: total in the period (2000/01-2007/08) total in the period (2000/01-2007/08)

Brazil produces surpluses to supply the world Brazil produces surpluses to supply the world stocksstocks

Production x Consumption*:Production x Consumption*: total in the period (2000/01-2007/08) total in the period (2000/01-2007/08)

Brazil produces surpluses to supply the world Brazil produces surpluses to supply the world stocksstocks

101021/04/2321/04/23

Source: UN COMTRADEElaboration: GV Agro

Main products (by value) - 1965Main products (by value) - 1965

Brazilian agribusiness exportsBrazilian agribusiness exports

Agribusiness Exports: US$ 1.35 billion (84.4%)Total Brazilian Exports: US$ 1.59 billion

111121/04/2321/04/23

Main products (by value)Main products (by value)

Brazilian agribusiness exportsBrazilian agribusiness exports

121221/04/2321/04/23

Developed Countriesfrom US$ 14.4 bi to US$ 34.8 bi

Variation (2000-2008*): +11.7% a.a.

Developing Countriesfrom US$ 6.2 bi to US$ 29.1 bi

Variation (2000-2008*): +21.3% a.a.

Source: Aliceweb-MDIC. Nota: * from jun/07toa mai/08 Elaboration: GV Agro

US$ 20.5 bi US$ 63.9 bi

Brazilian Agribusiness ExportsBrazilian Agribusiness Exports

131321/04/2321/04/23Source: CONAB Elaboration: GV Agro

The use of high technology resulted on an increase of 99% in productivity at the period from 1990/1991 to 2007/08.

* 1ª Estimate (october/2008)

Brazilian production of Brazilian production of graingrain

- - 27.2 million tons27.2 million tons- - 27.2 million tons27.2 million tons

141421/04/2321/04/23

Brazil: meat productionBrazil: meat production

Broiler +200%

Beef +77%

Pork +130%

Sources: ABIEC, ABEF e ABIPECS Notes: *Estimative

%

151521/04/2321/04/23

21st Century: the beginning of a 21st Century: the beginning of a New EraNew Era

Challenge: TO DIVERSIFY ENERGY SOURCESChallenge: TO DIVERSIFY ENERGY SOURCESUp to 2030, the world demand for energy should increase 58%.Up to 2030, the world demand for energy should increase 58%.

Sources: Nakícenovic, Grübler and MaConald, 1998 and Energy Information Administration - EIA/USA

161621/04/2321/04/23

Why biofuels?Why biofuels?

171721/04/2321/04/23

• More countries

producing

• Elimination of myths

• Global strategy

Organization of the marketOrganization of the market

181821/04/2321/04/23

Energetic matrix – Brazil and Energetic matrix – Brazil and WorldWorld

Source: MME/BEN (2007) Elaboration: GV Agro

World total: 11,434 Mtep

Renewable sources:45.8%

Participation in the total consumption

Brazil

2.1% 48.5% 100%

World

More countries producingMore countries producing

In 2007, sugarcane became the second main source of energy in Brazil.

191921/04/2321/04/23Source: BPStatistical Review of World Energy Elaboration: GV Agro

Tropical region: favourable to the sugarcane production

Energy: consumption Energy: consumption per capita per capita (2006)(2006)

More countries producingMore countries producing

100 countries could supply biofuels to 200 nations, while currently 20 oil producers provide fossil fuels to the rest of the World.

Tons oil equivalent

Sources: IEA, CONAB e IBGE Notas: para o cálculo da área, considerou-se um rendimento de 7.000 litros/ha. Elaboration: GV Agro

Substitution of part of the gasoline Substitution of part of the gasoline 3 CENARIOS: E-5, E-10 3 CENARIOS: E-5, E-10 and E-20and E-20World: potential demand for ethanol World: potential demand for ethanol (billion liters / year)(billion liters / year)

Demand for planted areaDemand for planted area

34,434,4 million hamillion ha(using E-20)(using E-20)

Worldwide demand for ethanol in the 3 cenarios (billion liters / year): 60.1 120.2 and 240.5

Market potential for ethanolMarket potential for ethanol

There is still a lot of arable land There is still a lot of arable land worldwildeworldwilde

““Taking these data at face value, and in relative terms, there is greatest Taking these data at face value, and in relative terms, there is greatest potential for agricultural expansion in Sub-Saharan Africa and in South and potential for agricultural expansion in Sub-Saharan Africa and in South and

Central America, which together form over 70% of the global potential Central America, which together form over 70% of the global potential increase.”increase.”

Source: LAND RESOURCE POTENTIAL AND CONSTRAINTS AT REGIONAL AND COUNTRY LEVELS FAO Rome, 2000

Ethanol world production: projection to Ethanol world production: projection to 20122012

222221/04/2321/04/23

Note: projections 2008/2012 are based on the capacity of production and the target of consumption of the main countriesSource: Fapri, Acti, FO Licht, Unica and Toepfer Elaboration: UNICA

Emissions of COEmissions of CO22 in 2005: 20 main in 2005: 20 main polluterspolluters

232321/04/2321/04/23Source: Embrapa Monitoramento por Satélite Elaboration: GV Agro

50% of50% ofemissionsemissions

Eliminating all mythsEliminating all myths

242421/04/2321/04/23

The replacement of 1,000 buses (diesel) by buses that use ethanol would avoid the emission of 96 tons of CO2 per

year, equivalentto emissions of 20,000 cars with gasoline.

The replacement of 1,000 buses (diesel) by buses that use ethanol would avoid the emission of 96 tons of CO2 per

year, equivalentto emissions of 20,000 cars with gasoline.Since 1970, is estimated that the use of ethanol in Brazil has avoided

emissions of 644 million tons of CO2 and 25.8 million tons last year.

Since 1970, is estimated that the use of ethanol in Brazil has avoided emissions

of 644 million tons of CO2 and 25.8 million tons last year.

Emission of GHG through the replacementEmission of GHG through the replacementof gasoline by ethanolof gasoline by ethanol

Compared to diesel, biodiesel reduces in about 50% of the CO2

emissions.

Compared to diesel, biodiesel reduces in about 50% of the CO2

emissions.

Ethanol from corn(USA)

Ethanol from beet(E.U)

Ethanol from sugarcane (Brazil)

Source: IBGE and CONAB

Production with sustainabilityProduction with sustainabilityEliminating all mythsEliminating all myths

262621/04/2321/04/23

Preserved Area **Preserved Area **

Planted Area(million ha)

Planted Area(million ha)

Production(million tons)

Production(million tons)7.1 million of ha

were preserved

Sugarcane: evolution of the Sugarcane: evolution of the productivityproductivity

Source: IBGE (Censo Agropecuário: 1970-1975-1980-1985; PAM (1990 até 2006); e LSPA (2007 e 2008)

Elaboration: GV Agro Note: * Estimate **Area calculated by the productivity of 1970

Eliminating all mythsEliminating all myths

9.3

272721/04/2321/04/23

* Fuel completely not renewable has value lower than 1.* Values superior to 1 indicate how much renewable is the fuel.

Source: World Watch Institute

Balance of energyBalance of energyEliminating all mythsEliminating all myths

Energy contained in the fuel / Used fossil energy to produce fuel

Biofuels: production costsBiofuels: production costs

Source: OECD

-0.40-0.200.000.200.400.600.801.001.201.401.601.802.00

04 05 06 07 04 05 06 07 04 05 06 07 04 05 06 07 04 05 06 07

Ethanol Ethanol Biodiesel Ethanol Ethanol

Sugar cane Maize Rape oil Sugar beet Wheat

Brazil USA EU EU EU

US

$/l g

asol

ine

equi

vale

nt

Year, fuel type, country

Energy costs

Processing costs

Feedstock costs

Co-product value

Net price gasoline

Net costs, total

Brazil: Automobiles and light vehicles – fleet Brazil: Automobiles and light vehicles – fleet projection (2006 to 2015)projection (2006 to 2015)

mill

ion

of v

ehic

les

mill

ion

of v

ehic

les

mill

ion

of v

ehic

les

mill

ion

of v

ehic

les

Sources: ANFAVEA, MAPA and ICONE

303021/04/2321/04/23

Source: UNICAMP

Excluded the Amazon Excluded the Amazon Region, Pantanal and Region, Pantanal and

declivity superior to declivity superior to 12%12%

Eliminating all mythsEliminating all myths

Soil and climate adapted to the Soil and climate adapted to the sugarcane production without sugarcane production without irrigationirrigation

313121/04/2321/04/23

Brazil: herd of cattle x pastureBrazil: herd of cattle x pastureEliminating all mythsEliminating all myths

More efficient livestock liberation of land for the agricultureSource: IBGE (Censo Agropecuário) e IEA/SP Elaboration: GV Agro *lotação média de São Paulo (2006)

pasture areapasture area

cattle (heads)cattle (heads)

Energy content of the sugarcaneEnergy content of the sugarcane

Energy contained in 1,000 tons of sugarcaneEnergy contained in 1,000 tons of sugarcane(tons in petroleum equivalent )(tons in petroleum equivalent )

Source: Nastari, Lisbon, 2000

Total energy: 162.59 tons in petroleum Total energy: 162.59 tons in petroleum equivalentequivalent

Bagasse56.43 tons

Sucrose51.11 tons

Tips andStraws

55.05 tons

Global strategyGlobal strategy

333321/04/2321/04/23Source: Cogen and Unica

The bagasse resulting from the processing of the cane represents 30% of the total volume. Raw material for the bioeletricity production

Estimates of the potential of bioeletricity in Estimates of the potential of bioeletricity in BrazilBrazil

Global strategyGlobal strategy

SugarSugar

EthanolEthanol

ExportsExports

DomesticDomestic

ExportsExports

DomesticDomestic

BioelectricityBioelectricity- Potential -- Potential -

51%51%

32%32%

Participation of the products in the income of the Participation of the products in the income of the sectorsector

Source: UNICA Note: For the calculation of the percentile of 2015/16 it was used as base the potential for production and export at constant prices of 2006.

353521/04/2321/04/23

Challenges to the sectorChallenges to the sector

• Commercial limitations?

- protected markets

- internal oil protection

- self-sufficiency (target of the countries)

- low/high prices cycles

• Constant Expansion of the Offer

- offer and demand balance

- investments

363621/04/2321/04/23

• Sectorial Regulation

• Research and Development

• Planning

• Administration

Challenges to the sectorChallenges to the sector

The ethanol certifications “Babel” The ethanol certifications “Babel”

373721/04/2321/04/23

ETHANOLETHANOL

PBCB Brazilian

Biofuel Program Certification

Brazilian Government

Biofuel CertificationMeó Consulting TeamGerman Government

Sustainable Production of Biomass Cramer Commission Dutch Government

RTFO Renewable Transport Fuel Obligation

UK Government

BSIBetter Sugarcane InitiativeBased in United Kingdom

RTSB Round Table on Sustainable Biofuels

Based in Switzerland

SEKAB, GREENERGYSweden, United Kingdom

Certifications proliferation schemes is counterproductive: : discourages initiatives and discourages initiatives and investments, particularly in investments, particularly in developing countriesdeveloping countries..

Certifications proliferation schemes is counterproductive: : discourages initiatives and discourages initiatives and investments, particularly in investments, particularly in developing countriesdeveloping countries..

EU DirectivesEuropean Union

National Certifications

Institutional Certifications

Deprived certifications

383821/04/2321/04/23

gvagro@fgv.br

+55 (11) 3281-3645

Thank You!