September 11, 2008


Drop in grain prices makes biofuel production viable


Production of biofuels have started making more economic sense in the past month with prices of feedstock such as corn, palm oil and soybeans declining, analysts at the World Oils and Oilseeds Convention in Singapore said Thursday (September 11, 2008).

"The recent fall in world prices of grains and oilseeds has made it possible for biofuels companies to break even, which they were not being able to do a few months back," said Siegfreid Meyer, an analyst with Vienna-based Austrian Biofuels Institute.


Meyer said the break-even cost for European bio-diesel manufacturers was EUR150-200/tonne, a level which they are able to earn now.


Meyer quoted data from a recent FO Licht study, which said Malaysia bio-diesel output may rise to 200,000 tonnes in 2009 from 90,000 tonnes in 2008, while production in Indonesia may rise to 350,000 tonnes next year from 150,000 tonnes. Indonesia and Malaysia are Asia's biggest bio-diesel producers and use palm oil as feedstock.


Still, sustained demand from biofuel makers for raw materials following the decline in prices may trigger a reversal and costs may increase again, said Chris de Lavigne, a Singapore-based analyst with consulting firm Frost & Sullivan.


He said that in 2007, while a number of factors led to the historical rise in food prices, biofuels undeniably played a role in that surge by increasing demand for grain products.


Spikes in prices of grains and oilseeds, feedstock for making biofuels, could recur in the longer run, as world energy demand grows and quality of arable land and availability of water for agricultural needs decline, he said.


Video >

Follow Us