Daily Biofuels Summary for November 8: Palm oil crosses $900 to new record as oil passes $96, consolidation begins in cellulosic ethanol, and China readies to impose biodiesel mandate

Top Story:

Palm oil futures rose to a record $901 per ton yesterday on the Malaysian Derivatives Exchange. The head of the Indonesian Palm Oil Association said that prices should be expected to climb to more than $1000 per ton in 2008. LMC’s managing director said that palm futures could rise to $1020 per ton by spring 2008 if crude oil reaches $100 per barrel. India has increased its palm oil imports by 32 percent this year to 2.62 million tons as global vegetable oils inventories continue to drop. China imported 3.9 million tons of palm oil through September.

Producer News:

In Massachusetts, cellulosic ethanol developer Mascoma acquired Celsys BioFuels, a cellulosic ethanol production technology company founded by a Purdue University team last year. The founder of Celsys will become the CTO of Mascoma. The price of the acquisition was not disclosed. Dartmouth professors Lee Lynd and Charles Wyman founded Mascoma in 2005 and raised $34 million from General Catalyst Partners and Atlas Ventures.

In Iowa, ALL Fuels has offered $70 million in cash and options to the owners of an undisclosed Iowa plant, as it aims to reach 500 million gallons of ethanol production capacity through internal growth and acquisition. ALL Fuels offered $102.5 million for a 44 Mgy ethanol plant in Stanley, WI in August.

International News:

In Ireland, the Carbery Group is supplying 660,000 gallons of whey-based ethanol to Maxol for use in the oil company’s E5 and E85 blends. The whey-based ethanol accounts for all of Ireland’s ethanol, making Ireland the only ethanol-consuming country in Europe not importing its product from Brazil. The whey is a by-product of the company’s milk and dairy production, and the carbon footprint is accounted for in the dairy production, making the whey practically carbon-free in terms of greenhouse gas emissions. Carbery said that it cannot increase production due to EU dairy production quotas and production caps.

In Brazil, HLC will commence biodiesel production at its 21 Mgy Petrolina plant in Pernambuco state in the first quarter of 2008. The Portuguese-owned HLC acquired Biodiesel do Vale do São Francisco (Biovasf) recently for $11 million.

In Australia, Axiom Energy is continuing with its buildout of a 40 Mgy biodiesel plant at the Port of Geelong, near Melbourne. The company said that beef tallow is only one of the feedstocks they plan to use, and the recent tallow price hikes which forced other plants to shut production will not have as great an impact on the Axiom plant’s profitability.

Research News:

The Energy Information Administration released reports that weekly gasoline blended with ethanol reached a record 2.119 million barrels per day for the week ending November 2, up from the previous record of 1.982 million barrels per day for the week ending October 26. The new record equates to 32.5 billion gallons per year on an annualized basis, or about 23 percent of US gasoline supply.

In Minnesota, KARE 11 television tested E85 in a flex-fuel Dodge Durango and found that fuel economy dipped 39 percent, compared to running the car on unleaded gasoline. The fuel efficiency of the Durango on E85 was 12.55 miles per gallon, compared to 20.41 miles per gallon with regular unleaded. A Consumer Reports test concluded that there was a 27 percent drop in mileage with E85.

Greenpeace released its “Cooking the Climate” report which concluded that forest clearance in Indonesia for palm plantations has made the country the third largest producer of greenhouse gas emissions, behind the United States and China. The study found that Indonesia is losing 2 percent of its tropical forest each year to deforestation, and that the resultant emissions more than offset the gain from switching from fossil fuels to biofuels. Indonesia has six million hectares of palm under cultivation and plans to expand this to 10 million hectares by 2015.

Policy and Policymakers:

China is drafting biodiesel blend standards and is expected to impose a 5 percent blending target by the end of the year, according to reports, and is looking at potential target dates for a 10 percent mandate. The Chinese government has set a consumption target of 200,000 tons of biodiesel for 2010 and 2 million tons for 2020. The government is reportedly concerned over increasing dependence on imported oil, which accounts now for 50 percent of overall oil consumption.

Consumer and Fleet News:

In Tennessee, the state has provided $190,000 to Appco to offset the cost of underground storage tank and dispenser installation for the sale of E85 or B20. The tanks will be installed at three Appco stations in Johnson City, Unicoi County and Sullivan County. The grants are funded through a $1.5 million Green Island grant program that reimburses companies for 80% of the cost of biofuels infrastructure up to $45,000 per pump.

In Michigan, Oakland County is converting its 225 heavy-duty truck fleet to B20 biodiesel by the end of the year. The County expects to save $30,000 per year on fuel and $20,000 per year on maintenance.

Financial News:

The Biofuels Digest Indexâ„¢, a basket of public biofuel stocks, fell 1.27 percent yesterday to 106.21 after a record increase of 5.76 percent the previous day. Losers and gainers were even as large-cap diversified agribusinesses and mid-cap pure-play ethanol stocks were all down for the day, while small caps eked out modest gains in trading. The Andersons (ANDE) led losers among the large caps, down 2.09 percent to $42.09, while Aventine Renewables, down 3.93 percent to $10.27, fell the hardest among the mid-caps. Among small-cap public stocks, Green Energy Resources (GRGR.PK) as up 5.88 percent while Better Biodiesel (BBDS.OB) continued in free fall and was down 15.56 percent to $0.76.

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