China to become corn importer in 2008 as food, fuel shortages loom

In China, the cancellation of all new grain ethanol production will not save China from becoming a corn importer in 2008. The country, which has 20 percent of the world’s population but only 7 percent of its arable farmland is facing a corn shortage at the same time as it has ramped up biofuel production to reduce oil imports.

By 2010, China plan to consume 10 percent of its fuel needs via renewables, including 6.7 million tonnes of ethanol and 11 million tonnes of biodiesel, and analysts say that China’s policy switch from grain to crops such as cassava, sweet potato and sweet sorghum will be “too little, too late” in order for the country to meet its fuel targets and remain food secure. One of the four largest ethanol producers in the country, Henan Tianguan Enterprise Group, is reported to be able to use only 40 percent non-grain feedstocks to meet its production targets.

Overall, China produced 264 million gallons of ethanol, but recently imposed a moratorium on corn ethanol production because of the impact on corn prices, focusing investment on cassava, sorghum and sugarcane.
RNCOS has released its Asia Pacific Biofuel Market Forecast, and projected that the global ethanol business would achieve a 14.7 percent compound annual growth rate in market value between 2006 and 2016. The reports also projects a 26.4 billion gallon global ethanol market by 2014, but projected a compound annual growth rate of 2.51 percent in China for the 2007-2015 period, and 2 percent in India.

Across China, food prices have soared 60 percent on selected goods, prompting fears that food riots, similar to those which precipitated the 1989 uprising, may occur in major Chinese cities. Strong curbs on production of fuels from food crops is expected, to reduce pressure on prices, as the country emerges from an extreme cold crisis, on top of major crop failures. Tariffs of up to 25 percent have been placed on export of key biofuel feedstocks.

In recent weeks, the province of Guangxi said that a cassava (tapioca) shortage may lead it to curtail ethanol production projections for this year, and have cast doubt on the province’s plans to double production by 2010. Provincial officials originally set a production goal of 1 million tons of ethanol but is looking now at a best-case scenario of 200,000 tonnes.

Late last year in Shanghai, fuel riots began because of shortages.

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