At the press conference, Frederick W. Schoenhut, NYBOT Chairman, said: “Our excitement today is shared by many all across the globe, as we have received an incredible amount of interest and support for this contract from every possible constituency, including e thanol producers, processors and merchandisers, dehydrating plants, energy trading companies, oil refiners and gasoline blending and marketing firms, as well as sugar producers that produce ethanol and chemical firms that produce synthetic ethanol . Based on this broad interest and our own calculations, we strongly believe this contract will succeed in providing a critically needed world ethanol pricing, hedging and investment tool for all these market participants.”
According to FO Licht, a leading commodity organization, ethanol output is estimated at 10.2 billion gallons, and annual growth in output is projected at 5-10% until at least 2012. Approximately 61 percent of the world’s ethanol comes from sugar, and NYBOT’s ethanol contract underscores the increasing role of this cleaner-burning additive to gasoline and its growing importance to world trade. The contract will trade alongside NYBOT’s popular World Sugar contract.
“In 1925, Henry Ford pronounced ethanol to be the “fuel of the future.” Now, some 79 years later, ethanol use throughout the world is finally becoming the “fuel of today.” By 2010, ethanol demand is projected to double to almost 16 billion gallons. Countries such as Japan, the EU, Brazil, Canada and the U.S. are using more and more ethanol every year, as governments and societies demand cleaner burning, eco-friendly gasoline, as well as having less dependence on foreign oil,” said Charles H. “Harry” Falk, NYBOT President and CEO. “Our ethanol contract answers this call and further promotes ethanol as the solution to achieving these objectives.”
U.S. federal legislation includes provisions encouraging the use of ethanol as a gasoline additive, and internationally, the Kyoto Protocol, a worldwide agreement to impose binding standards on developed nations to limit their greenhouse gas emissions, also encourages the use of bio-fuel additives such as ethanol.
Mr. Eduardo Pereira de Carvalho, President of Unica, a leading Brazilian sugar trade group, also spoke at the event.
There is no clear price correlation between ethanol and other fuel manufacturing components, as ethanol does not track well with the octane market (gasoline). As a consumable commodity with an economic presence in both the agricultural and energy sectors, ethanol needs its own price reference.
The new contract (symbol “XA”) calls for free on board (FOB) vessel delivery of 7,750 U.S. gallons of biomass-derived, undenatured, anhydrous ethanol meeting specific quality criteria as described in the contract rules. The contract also specifies nine countries of origin, such as the Bahamas, Brazil, Costa Rica, El Salvador, Guatemala, Jamaica, Nicaragua, Panama and the United States. Priced in cents per gallon, the contract will list for trading the months of February, April, June, September and November. The ethanol futures and options contracts will trade in NYBOT’s sugar pits from 8:50 am to 12:05 pm (NY Time).
Ethanol is an alcohol-based alternative fuel produced by fermenting and distilling starch crops that have been converted into simple sugars. It can be produced from any biological feedstocks such as sugar cane and corn. Most commonly used to increase octane and improve the emissions quality of gasoline, it has the potential to reduce dependence on oil.
The New York Board of Trade (NYBOT) is the parent company of the Coffee, Sugar and Cocoa Exchange, Inc. (CSCE) and the New York Cotton Exchange (NYCE). Through its two exchanges, NYBOT offers an expanding range of agricultural and financial products. Information about the New York Board of Trade can be found at www.nybot.com and www.nybotlive.com .
