Biofuels eat into China's food
stocks By Antoaneta Bezlova
BEIJING - China's biofuel industry is
booming thanks to voracious demand for energy to
power the country's high-flying economy. Applying
modernized versions of ancient chemical processes
to convert crops and oils into energy sources,
Chinese entrepreneurs have created a profitable
"green business" with plenty of room to grow.
But worried over surging crop prices,
China is now clamping down on the use of corn
(maize) and other edible grains for producing
biofuel. While it wants to
support the growth of alternative energy sources,
Beijing says the issue of national food security
should take precedence over the country's green
agenda.
"In China the first thing is to
provide food for its 1.3 billion people, and after
that, we will support biofuel production," the
state-run newspaper People's Daily quoted Wang
Xiaobing, an official at the Agriculture
Ministry's Crops Cultivation Department, as saying
this week.
China has been encouraging the
production of biofuels such as ethanol and methane
from renewable resources to reduce the country's
growing dependence on imported oil. Once an
exporter, China now imports at least 43% of its
oil supply.
Biofuel is also seen as an
environmentally friendly substitute to
pollution-producing oil. Chinese economic planners
have made the development of green energies such
as ethanol fuel and biodiesel a key priority in
the country's five-year economic plan. By 2020
they want green energies to account for 15% of all
transportation fuels.
Yet surging demand
for biofuel is now partly blamed for recent price
hikes in the food market and for shortages in
grain stocks. Wheat prices are at their highest
level in a decade, due to poor harvests in key
producing countries such as the United States and
Australia, while corn prices have surged by up to
20% in local markets.
Beijing has begun
auctioning some of its wheat reserves to halt the
rise in crop prices and prevent panic among the
public. Despite predictions that this year would
see another bumper harvest, government officials
feel compelled to restrict the use of corn for
producing biofuel.
"We have a principle
with biofuel: it should neither impact on the
people's grain consumption, nor should it compete
with grain crops for cultivated land," the
People's Daily quoted Yang Jian, director of the
Development Planning Department under the
Agriculture Ministry, as saying.
Government officials estimate that corn
contributes about three-fourths of the raw
material used for making ethanol in China. The
output of ethanol fuel is projected at 1.3 million
tonnes this year, according to the China Daily.
Experts say, however, that output from private and
public producers this year may reach 5 million
tonnes.
With biofuel demand booming,
existing producers have been ramping up production
and new players have been entering the market.
They made only 1 million tonnes of ethanol fuel in
2005 but by 2010 China's ethanol-fuel production
may reach as high as 10 million tonnes, local
press reports say.
As biofuel is produced
from renewable biological resources, what
government officials worry is that overcapacity
may lead to a shortage of edible grains and
feedstock supplies. This has already happened with
cornstalk used in ethanol production. Cornstalk
prices in China have jumped 500% to US$30 per
tonne since 2005.
The same is now
happening with corn. Industrial processing in
China consumed 23 million tonnes of corn in 2005,
an annual increase of 16.5% from 2001, while corn
production increased at the slower rate of 5%
during the same period, according to a circular
released this week by the National Development and
Reform Commission (NDRC), China's top economic
body.
While rivalry between food and fuel
producers for grain is not limited to China, the
problem is particularly acute in this country
because of the low per capita availability of
arable land to feed its vast population.
The grain crop is expected to hit a record
490 million tonnes this year, the third straight
year of bumper harvests, but Chinese planners are
worried that fast-shrinking farmland could affect
grain supply in the near future. Arable land is
said to have shrunk by 8 million hectares between
1999 and 2005.
"We should never relax our
efforts to focus on grain production by ensuring
there is enough acreage and improving per-unit
output," Yang Jian was quoted as saying.
Experts warn that if ethanol production
continues to be corn-based, China will be forced
to import the crop by 2008. Relying on crop
imports is a sensitive issue as the government
policy supports food self-sufficiency for the sake
of national security.
"The excessive
growth of corn processing has resulted in scarce
feed for livestock and affected the development of
animal husbandry. Some main producing areas are
even considering importing corn," said the NDRC
circular. It demanded that local producers step up
efforts to make ethanol from non-grain sources,
such as potato and sweet sorghum.
Chinese
producers, however, continue to make ethanol from
corn because the mass planting of non-grain
feedstock such as cassava and sorghum has yet to
be implemented on a large scale because of the
lack of suitable farming technology.
