Asheville, N.C., Aug 7 - Ethanol could help blunt a surplus in sugar when the United States and Mexico have an open market in sweetener trade starting in 2008, industry officials said Monday.
Under the terms of the North American Free Trade Agreement (NAFTA), all barriers in sugar and sweetener business are supposed to be eliminated on Jan. 1, 2008.
Analysts have warned that an excess in sugar output in both countries could make it virtually impossible to go to an open market because of a glut in supplies.
One solution that industry officials are considering would be to use sugarcane to manufacture the alternate fuel ethanol.
"I continue to share the view that ethanol can play a role in balancing our combined markets," Donald Carson, the vice-chairman of the American Sugar Refining, Inc., said in a speech to the annual meeting of the American Sugar Alliance here.
He said in a separate interview that using cane to churn out ethanol "will be one mechanism to reduce the supply pressures" from an open sugar and sweetener market in the NAFTA countries.
"I think ethanol is to become a key player in this equation," added Jose Pinto Mazal, chairman of Mexican sugar producers Beta San Miguel.
Ethanol is an alternate fuel produced from a variety of plants. It is manufactured mainly from corn in the U.S. while the main source for the fuel in the world is Brazil, which devotes half of its massive cane crop to the fuel.
Industry officials said current U.S. ethanol production stands roughly at 4.798 billions gallons per year (GPY), or around 300,000 barrels per day (BPD).
There are 101 ethanol bio-refineries nationwide and at least 40 more are supposed to be constructed with a combined annual capacity of over 2.2 billion gallons.
Production will need to rise by around 1.5 billion GPY or 100,000 BPD to meet the higher demand for the fuel.