Daily Biofuels Summary for September 10

Top Story: In the Philippines, an article in the Inquirer questioned the economics of jatropha cultivation. The article concluded that, without government subsidy support, jatropha-based biodiesel was only economically viable if crop yields exceed 50,000 kilograms of jatropha seeds per hectare, or the price of diesel reaches $12.51 per gallons. The poor yields from Philippine soil were cited as a potential risk, as well as the lower yields that could be expected from planting jatropha in non-optimal land. The article strongly questions the viability of jatropha production for Philippine farmers, and strongly criticizes figures from the Philippine National Oil Co.-Alternative Fuels Corp. that predict income of $2,600 per acre from jatropha, based on a two-year investment cost of $2,600 suggesting that seedling costs alone would reach $1900 per acre.

Producer News: In Iowa, Unity Ethanol and Cedar River Ethanol have announced a merger. The development-stage company created by the merger is projected to produce 100 mgy of corn ethanol….In North Dakota, the Red Trail Energy ethanol plant commenced production, with output estimated at more than 50 million gallons per year….In Texas, biodiesel is facing a bleak future after biodiesel production incentives were shut down by the state government. Under the old program, producers received a 16.8 cent incentive per gallon from the state. The loss of the program in August, combined with the 50% rise in soybean prices to 40 cents per pound, and potential elimination of a federal biodiesel tax credit and problems in the national credit markets, all spell trouble for the Texas biodiesel business. Texas is the second-leading state in biodiesel production, with a projected 180 million gallons in 2007 from 20 plants. Iowa leads the nation with 200 million gallons produced by 11 plants. With other costs added, biodiesel producers say they are now paying about $3.50 per gallon just to make the fuel. By comparison, the retail price of conventional diesel was under $3 per gallon last week.

International News: In the Philippines, a prominent Senator urged local businessmen to invest in ethanol production to counter an influx in low-cost sugar that will result from the reduction in sugar tariffs in 2010 under the AFTA agreement. The sugar tariff is scheduled to drop from 65% to 5% in 2010. Lack of local investment has prevented the commencement of ethanol plant construction in the Philippines, with ethanol fuel seen as a means of propping up demand for sugar at premium prices….Israeli biodiesel start-up Galten will raise $10 million from a group of investors leaded by UK private equity fund Capital Partners. Galten will cultivate jatropha in Ghana….In China, drought conditions have hit 27 million acres of crop-producing land, flood waters in South China have affected another 21 million acres, and a locust in Sichuan province has affected another 1 million acres. Total affected area is 17% of China’s total arable land, leading the China Daily to speculate that China will have to import food this year. The shortage of land, and the potential for a shortage in corn, has prompted a moratorium on ethanol plant construction and a statement from the National Energy Leading Group that China will not pursue ethanol production from food crops….In India, three state-owned oil marketing companies have fallen short of their ethanol procurement requirements to meet an E5 ethanol mandate. Contracts signed by the companies last November called for procurement at an average monthly rate of 8.5 million gallons per month, but actual procurement has averaged 2.3 million gallons per month. The companies blamed high taxes, prompting Bihar and Jharkhand states to reduce import levies in an attempt to stimulate procurement.

Research News: In Pennsylvania, groundbreaking is scheduled for a 1/4-acre grass-based ethanol demonstration plant. The company’s promoters claim a yield of up to 75,000 gallons of ethanol per acre, more than 100 times the yield from corn. Earth Conservancy has donated 10 acres for the project, which is backed by a combination of grants and private investments.

Policy and Policymakers: President Lula of Brazil began a four-country Scandinavian tour aimed at promoting ethanol exports and signing environmental agreements. Brazil is expected to sign a new agreement for ethanol export to Denmark, adding to its existing exports to Norway, Finland and Denmark. After completing his five-day Scandinavian visit, the President will visit Spain before heading home….In addition to imposing a B3 mandate effective in 2012, South Korea has extended biodiesel tax breaks until 2010. The current B0.5 mandate will be increased annually by 0.5 to bring the nation to B3 in 2012….In Washington, the head of the US Forest Service proposed replacing 15 percent of the nation’s gasoline with wood-based cellulosic ethanol, and doubling carbon dioxide absorption in the nation’s forests….The Chairman and CEO of Chevron told APEC attendees in Sydney that biofuels made from non-food crops, such as waste, are required to reduce the world’s reliance on fossil fuels. He stated that it takes 15% of the US corn crop to produce enough ethanol to meet 3% of US fuel demand. He went on to say that corn prices have doubled, wheat prices are at new records, and that biofuels are driving agricultural prices up.

Consumer and Fleet News: The National Biodiesel Board has launched a service to help truckers find biodiesel. Retailer locations will now be located on ProMiles XF truck routing and mileage software.

Financial News: The Biofuels Digest Indexâ„¢ (BDI), a basket of 21 major public biofuel stocks, fell 1.60% today to 99.70, as the market was stunned by the first monthly US payroll reduction in four years. Big Ethanol was hit hardest with Aventine Renewable Energy (AVR) down 5.81% to $13.13, VeraSun Energy (VSE) down 5.07% to $12.93, and Archer-Daniels-Midland (ADM) down 1.33% to $32.71. Some small caps found higher ground today, led by Environmental Power (EPG), up 2.74% to $4.88. Today, Calyon Securities initiated coverage on US BioEnergy (USBE), VeraSun, and Aventine. In the broader markets, the Dow Jones industrials fell 249.97 points to 13113.38, the S&P 500 fell 25.00 to 1453.55 and the Nasdaq tumbled 48.62 to 2565.70. The monthly payroll report showed 4,000 fewer non-farm jobs, far lower than the 100,000 new jobs forecasted by economists.

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