December 18, 2006

 

China to rein in biofuel corn use amid high prices

 

 

China is taking steps to control biofuel projects that use corn as a feedstock, in order to safeguard food security, the official China Daily reported Monday, citing government officials.

 

"We have a principle with regard to biofuel: it should neither impact the people's grain consumption, nor should it compete with grain crops for cultivated land," said Yang Jian, director of the development planning department under the Ministry of Agriculture.

 

This is the first time the government has explicitly stated its policy on biofuel development.

 

As corn prices have risen by around 15 percent-20 percent across the country in the past month, the government has taken measures to check soaring demand from processors in a bid to ensure stable food supplies, analysts said.

 

"The National Development and Reform Commission has suspended the approval of new ethanol projects that use corn as a feedstock, so as to control industrial consumption of corn," said Zhang Liwei, an analyst at the China National Grains & Oils Information Centre. The NDRC is China's top economic planning agency. Food and animal feed account for over 72 percent of China's corn output, Yang said.

 

"Providing food to a population of 1.3 billion is always our first priority," said Wang Xiaobing, another official with the Ministry of Agriculture.

 

China's industrial consumption of corn is expected to reach 30 million tonnes in the 2006/2007 crop year, which runs from October to September, up 13.2 percent on-year, according to the CNGOIC.

 

"The government will also cut direct subsidies to existing ethanol producers," he added.

 

China offers subsidies ranging from RMB1,000-RMB1,600 to four major ethanol producers - Jilin Fuel Alcohol Co., Heilongjiang China Resources Alcohol Co., Anhui Fengyuan Biochemical Co. and Henan Tianguan Fuel Ethanol Co. - which have the capacity to produce about 1.02 million tonnes of ethanol a year.

 

China's corn output will total 142 million tonnes in 2006/07, up from 139 million tonnes in 2005/06, according to the CNGIOC.