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China Halts Expansion of Corn Ethanol Industry; Focus on Biomass Feedstocks

20 December 2006

New Kerala. China has suspended further expansion of its corn ethanol industry in order to halt a rapid increase in corn prices, which climbed almost 5% in November.

The National Development and Reform Commission (NDRC) has ordered local governments to stop approving new projects that process corn for industrial uses, to use non-grain feedstocks to produce biofuels (e.g., cellulosic ethanol from biomass), and to develop the industry more effectively.

China processed more than 23 million tonnes of corn for industrial use last year, an increase of 84% from 2001, while output of corn only grew by 21.9% over the same period. China currently produces around 10 million tonnes of ethanol annually (3.3 billion gallons).

Ethanol mixed with gasoline is sold in five provinces and 27 cities in China, accounting for 20% of the country’s total gasoline consumption.

Expanding industrial demand, along with increasing need for corn by livestock and the reluctance of corn growers to sell in expectation for higher prices, have contributed to a 6.8 per cent rise in the price of corn this year.

“Excessive expansion of corn growing will squeeze the production of wheat and rice,” an official with the NDRC said.

December 20, 2006 in Cellulosic ethanol, China, Ethanol | Permalink | Comments (26) | TrackBack (0)

Comments

Harvey D.

Why don't you re-do your 1920s to 2000s bread price exercise, but instead attempt to account for all major inputs instead of one chosen at random? My guess is that you'll probably find that price increases in the very large number of other inputs that go into making a loaf of bread have a lot to do with the price increase from then to now. I'm talking about things like labor, real estate, etc. Many of those actually have gone through 50-fold nominal increases in the past century. Focusing on the price of one input, out of several mostly unrelated ones and then attributing the change in final price to that one alone is not good sense.

In fact, if you go to the BLS (bureau of labor statistics) website and fool around with the recent price data statistics (1980-present), you can compare the price of wheat flour (at retail, which adds some of the same labor and marketing costs that apply to finished bread but which do not affect the wholesale purchases made by bakers) to the price of actual bread (both per pound). You can find as many examples of intervals where flour rose considerably while bread did not rise at all, as you can find intervals where flour rose somewhat and bread rose even more. The effect of flour price fluctuations seems to be lost in the "noise" of other input fluctuations when looking at the final price of bread.


Roger,

I think you should justify your assertion that "food" crops are somehow sacred, and that it is improper to use them for "other" purposes. First, where do you draw the line between permitted and non-permitted uses? What is a food crop? Is feeding corn to cattle okay, or should we eat it all directly? What about growing alfalfa (cattle feed) on land that might support wheat?

Once we've fed everyone we possibly can -- namely, everyone on this planet who has not been put beyond the reach of food aid agencies by war, civil strife, or natural disaster -- what do you propose we do with the leftovers?

Should farmers simply grow less? We already try to pay subsidies for that. What if a "food" crop also happens to be the best input for a certain industrial process? Should we find a more expensive way to make that product simply so we don't trespass on a corn taboo?

If your argument is that modern agriculture is environmentally damaging and should not be engaged in more than is absolutely needed, I'd be willing to listen to if, if you justified it.

Food crops are commodities -- they are something we pay farmers to produce, and use to satisfy our needs. Notwithstanding the more "touchy-feely" ethos behind the organic movement, viewing food in this practical manner, and not in some quasi-mystical one, has made food exceptionally abundant and fairly safe. And the dirty little secret behind organics is that as they hit the mainstream and feel the need for increased volume production, they are adopting some of the techniques -- and mindset -- of "conventional" agriculture. There is simply no other way to feed six billion people.

Also, corn-burning stoves date back to the 1970s, at least. Corn has a fairly high energy density (due in part to its oil content), is easy to transport and easy to meter into closed stoves or furnaces because it automatically comes in easily-pourable "pellet" form. You can grow a new crop of it every year instead of chopping down trees that take decades to reach full size. And if you get hungry, you can eat it instead of burn it -- something you can't do with a woodpile. Corn prices are not usually low enough to really justify them in cost terms, but under certain circumstances they are actually practical and convenient.

Posted by: NBK-Boston | December 22, 2006 at 09:38 PM

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