US cane-to-ethanol economic on higher oil: USDA

WASHINGTON (Reuters) - Expanding U.S. sugar cane acreage with the intention of boosting ethanol output would be economic if crude oil prices were to hold at last year's peak, a U.S. Department of Agriculture official said on Tuesday.

The NYMEX light crude oil futures contract CLc1 peaked at $78.40 a barrel on July 14, 2006, and has since eased to around $51 a barrel.

"If you believed that oil prices would continue (at that peak) it might be economic to do that," said USDA Director of Energy Policy Roger Conway, speaking at the Reuters Global Biofuels Summit.

"Part of the issue is our (sugar cane) yields are not as good as the yields that they're getting in Brazil," he said. "Secondly, our plants are older; they don't cogenerate the bagasse."

Bagasse is sugar cane residue that many Brazilian sugar and ethanol refineries burn as fuel, cutting down on their energy costs. Few U.S. refineries are currently equipped to run on bagasse.

Another competitive advantage Brazil has over the United States are the policies by which sugar is priced in the respective markets that make boosting U.S. ethanol output less attractive, Conway said.

"We also have a sugar program which sets a floor for the price of sugar so quite often Brazil's getting, I don't know, three cents a pound and we might be like 15, 20 cents a pound and that makes a difference too," he said.