Daily Biofuels Summary for October 26: Transatlantic Economic Council to tackle Atlantic biofuels trade; ethanol price up, biodiesel feedstock price rises put production in jeopardy
Top Story:
The new Transatlantic Economic Council (TEC), which meets in Washington in November, is expected to propose definitive standards for biofuels trade. Recently, numerous European biodiesel producers have reduced capacity or shut down due to competition from subsidized soybean-based biodiesel from the United States. Last month D1 Oils reduced its planned capacity expansion in the UK to 320,000 tonnes in 2008, and the European Biodiesel Board is threatening a WTO action for dumping. US exports to the EU have grown from 90,000 tonnes in 2006 to 700,000 tonnes so far this year.
Producer News:
At the Chicago Board of Trade, the November contract for denatured ethanol rose $1.76 a gallon, up 1.76 percent. This is the highest price since August 17. Trade on the contract continues to be light, with six contracts representing 174,000 gallons traded. Meanwhile, the Chicago Mercantile Exchange delisted its ethanol futures contract. The contract was traded on the Globex platform. The CME said that interest levels in the contract were too low. The CME’s exit leaves only the CBOT contract and a sugar-based ethanol contract traded on the New York-based Intercontinental exchange. The December crude oil contract rose to (0.46 a barrel on the New York Mercantile Exchange. RBOB gasoline rose to $2.2358 per gallon.
In Kentucky, Alltech announced a 10 Mgy next-generation biofuels plant. The $40 million project received tax benefits up to $8 million under incentives created by Kentucky’s Incentives for Energy Independence Act (IEIA), and is projected to create 93 new jobs. The plant will utilize Alltech’s Solid State Fermentation technology and will produce biofuels from leftover fiber from corn ethanol production.
In Iowa, the Freedom Fuels biodiesel plant in Mason City has shut down production due to the high cost of soybean oil. The plant has a capacity of 30 Mgy of biodiesel, and hopes to resume production in November. Four people were laid off from their jobs as a result of the shut down.
International News:
In Jamaica, more details have emerged in the Jamaica Observer about the start-up woes of the large-scale Jamaica Broilers ethanol operation. It provides an excellent summary of the risks and trading conditions during this period of ethanol’s evolution as an industry.
In India, the treasurer of JalaSpandana warned that the government of India had mandated ethanol production to support the sugar industry in 2002, but backed away from its commitment in 2004. The 15 million gallons of ethanol produced by Renuka Sugars, Godavari Sugars, Ugar Sugars, Dodhaganga Krishna Cooperative Sugar Factory and Shamanur Sugars were never used.
In Brazil, state oil company Petrobras announced that they would construct a pilot cellulosic ethanol plant by 2010. The pilot plant would produce 740 gallons of ethanol from 10 tons of sugar bagasse.
In China, Ministry of Finance finalized a farm subsidy plan for biofuels, which will take effect in 2008. Subsidies of $403.5 per hectare per year will be provided except for plantings in forested areas, which would receive $360 per hectare. The land used can only be land not intended for food crop use.
In Swaziland, more details emerged on the cassava-based ethanol initiative for drought-stricken Lavumisa, in southeastern Shiselweni. The project was announced by the government, at a time when 40 percent of the country’s one million population are facing food and water shortages. The government has indicated that it expects a yield of 80 gallons per ton of cassava. USA Distilleries will invest $5 million in the project and the government is providing unirrigated land. Critics of the project say that the government should grow more food, but the government is determined to develop 700 wage-paying jobs, stimulate exports, and use the resulting economic activity to reinvest in agricultural production, concluding that traditional agriculture is not reliable especially in periods of drought.
In Oregon, TerraFuels filed suit against Smiling Earth Energy, stating that Smiling Earth failed to provide 85 percent of financing for a $310 million biodiesel plant, refused to return a $100,000 deposit, and reneged on an agreement to provide palm oil feedstock.  Smiling Earth recently received approval for its plan to build a 320 million gallon biodiesel facility in Chesapeake County, Virginia. The plant would be the world’s largest.
In the Netherlands, AlgaeLink announced a photobioreactor system for algae made of UV protected transparent sheets rather than pre-manufactured tubes. The sheets are assembled on delivery into tubes, saving 90 percent on shipping costs with this configuration.
In Bulgaria, Green Fuel announced a new plant that will produce 31 Mgy of biodiesel and 17 Mgy of ethanol. The $70 million project will be constructed in the Pleven region, and will produce 50 percent of Bulgaria’s total biodiesel output.
In Malaysia, palm oil futures reached an all-time record as palm oil tracked the increases in crude oil prices. The Bursa Malaysia Derivatives Exchange January contract closed as $829.43 a tonne.
Research News:
In Washington, LECG released a study projecting that the capital cost to meet the proposed 2022 Renewable Fuel Standard of 36 billion gallons would be $105.5 billion. The report also detailed that the Farm Credit System had provided $3.9 billion in loans or loan commitments to the ethanol industry, or 1.3 percent of the System’s portfolio, and that this resulted in construction benefits of $23.2 billion in gross economic output, $5.5 billion in household income, 136,345 new jobs in the construction of ethanol plants, plant operation benefits including $317 million in annual transportation revenue to ship ethanol; $24.8 billion in gross economic output, $3.6 billion in household income and 99,188 new jobs in the operation of the plants; and $4.3 billion in annual farm revenue for corn to make ethanol.
Policy and Policymakers:
Synthetic ethanol producers INEOS, PetroSA Europe, and Sasol Solvents Germany have joined together to launch the IEA (Industrial Ethanol Association). The group will represent the sector to policymakers and aims to ensure a fair competitive environment and overall economic health for the European ethanol industry.
More details have emerged on the sugar buy-back program in the new Farm Bill. The bill calls for the USDA to buy excess sugar from US producers at 22 cents per pound, to cope with the expected flood of cheap Mexican sugar when sugar trade restrictions are lifted in January under NAFTA. The USDA will resell the sugar to ethanol producers at 4 to 7 cents per pound. The program is expected to cost taxpayers $660 million. A similar buyback program in 2001 resulted in the sale of only 10,000 tons of sugar to ethanol producers at 4 cents per pound, out of 100,000 tons offered.
In the Netherlands, eight biodiesel manufacturers have banded together to form the Netherlands Biodiesel Industry Association (VNBI), and have set a goal of producing 410 Mgy of biodiesel by 2009. The VNBI will lobby government and build alliances with other industries and environmental groups.
Both Oklahoma and Tennessee have expressed interest in increasing their state’s leadership in the biofuels industry. Governor Brad Henry of Oklahoma said that the state can become a leader in renewable energy while diversifying its economy and creating jobs. The government created the Oklahoma Bioenergy Center for cellulosic ethanol research. In Chattanooga, the executive vice president of the University of Tennessee made similar points in behalf of growth for Tennessee. Dr. David Millhorn pointed to the University’s partnership with Mascoma, a cellulosic ethanol start-up that will operate a 5 Mgy cellulosic ethanol pilot plant.
Consumer and Fleet News:
In Colorado, the fifth train derailment this year occurred at Windsor. The derailment was the third this year in the US that involved an ethanol tank car. The derailment, which occurred on a section of track that had been repaired following previous derailments, affected an empty ethanol tank car.
Financial News:
Yesterday, the Biofuels Digest Index, a basket of public biofuels stocks, rose 0.68 percent to 102.18, on a strong rise of 1.14 percent for Archer-Daniels-Midland (ADM) and a 0.81 percent increase in Aventine Renewable Energy (AVR). ADM closed at $34.71 and AVR rose to $9.97. Losers led winners 8 to 7 as ethanol stocks continued in general to be hit hard. VeraSun Energy (VSE) was down 5.23 percent to $12.32 and Pacific Ethanol fell 2.21 percent to $7.53.
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