Indonesia Becoming Hot Ethanol Producer

By now, everyone is more or less familiar with Brazil's position as a leading supplier of sugar-based ethanol. The country has leveraged its immense sugar cane production into a fuel economy that's been in place since 1975.

Not surprisingly, that's recently caused a couple of names to come calling. The President was in Brazil talking up the possibility of an ethanol pact last March, with an eye undoubtedly looking to the possibility of creating the biofuel equivalent of OPEC.

On the heels of this visit, agribusiness giant Arthur Daniels Midland (ADM) announced it was getting into Brazil's sugar can market (previously blogged here) either through development or acquisition. Given the weakness of the current corn ethanol market in the US (high corn prices, abundance of small ethanol producers), accessing Brazil's sugar cane crop makes sense for a long term strategy to guard against price fluctuations.

But even with all that sugarcane and technical expertise, Brazil cannot come close to meeting US energy needs. Which leads us to .... Indonesia.

Shortly after US-Brazil ethanol pact, Brazil entered into a relationship with the Indonesian government to provide technical expertise in developing and expanding Indonesia's sugarcane industry. Indonesia already has about 5.5 million acres slated for sugarcane ethanol production, and several Indonesian companies are looking to double (or triple) their holdings. The Indonesian government is also preparing to spend over $1 billion on subsidies towards local farmers, and has already signed agreements with a number of companies to pump another $12 billion into the ethanol industry.

Given this aggressive growth position, Brazil may soon find that it is surpassed by its student...