Sugar Prices Leap as Commodity Futures Punt on Biofuels
The carbon economy has not only raised energy costs but has started hurting food prices, as commodity futures of sugar are aggressively rising. The recent spurt was triggered last year by India's announcement of large scale sugar imports and shows no signs of abetting. Reportedly, each barrel of oil is swapped 25 to 30 times in the futures market during price peaks before it finds its way to the US retail markets at 50% higher prices. Similarly one metric ton of sugar is cross traded 10 to 15 times at the London exchange before it reaches India, 30% overpriced.
The drive for biofuels by big oil is creating commodity speculation in sugar, corn, soybeans, and canola oil. The EPA's recent clearance of the rule for expanded renewable fuel standards (RFS2)—mandating the production of 36 billion gallons by 2022—and the development of commercial plants by Range Fuels and Abengoa Bioenergy have increased speculation.
By 2020, 328 million barrels per annum biodiesel will reduce GHG by 138 million MT consuming almost 40% of the US corn crop and 20% of Brazil’s sugar cane.
Alternative energy today is entering into a very critical sector that will impact the future of nations, and worldwide poverty. The FAO recently announced that an increase in commodity and energy prices could bring political upheaval in the developing world. Commercial ethanol plants are still not operational in US and will have initially a combined capacity of only 50 million gallons per year. So it is not the biofuel plants, the high demand crops, or the processing capacities that are causes for real concern, but speculation.
Like coal and oil there is a demand drop in the consumption of sugar, corn, and alcohol worldwide. However, oil giants like Shell have gone into long-term distribution MOU's with Brazilian ethanol producers that will be adding to speculation in the commodities market on sugar futures.
The big cartels are rigging up the markets once again. It's high time to start taxing commodity futures transactions.