Today in Biofuels: Venezuela initiates fuel from food ethanol drive; switchgrass ethanol for $0.44 per gallon; famine in 36 countries as food crisis spreads
Top Story:
In Venezuela, the state oil company Petroleos de Venezuela announced that it will commence making sugarcane and cassava into ethanol, reversing the previous Chavez government policy opposing the conversion of staple foodstocks into ethanol. Petroleos said it will construct four plants and will commence production in the first quarter of 2010. Total capacity was not announced, but one of the plants was reported to have a capacity of 92 Mgy. President Chavez recently introduced an E7 national ethanol target, and said at the time that his government is no longer opposed to the use of ethanol, but opposes the use of foodstocks for ethanol production. The President said Chavez said that for each acre planted to grow sugarcane for biofuels, his government would plant two acres for food production. This would require 36 million acres of land to be converted to food production, based on 780,000 barrels a day of oil consumption for Venezuela as reported in the New York Times. This is equivalent to an area the size of the state of Iowa.
Producer News:
In Texas, the 100 Mgy White Energy plant in Hereford commenced production of corn ethanol. The company is expecting top open a second 100 Mgy facility in Planview next month. Panda Ethanol is also on track to open a 100 Mgy ethanol plant in Hereford later this year that will gasify 1 billion pounds of manure to provide its power. The 40 foot high pile of manure feedstock will be housed in a barn. By co-locating the ethanol plant with cattle feedlots, the companies will be able to sell wet distillers grains, compared to investing in a drying process as Midwestern corn ethanol plants typically do.
In Pennsylvania, Indian Orchard Energy is planning a 60 Mgy corn ethanol plant in Texas Township, and is raising up to $160 million from investors and lenders to fund the project. More than $100,000 was raised towards land purchase deposits of $800,000 last week via tours of the proposed 91-acre site.
International News:
China Agri-Industries Holdings said that it will build an expansion at its 200,000 tonne ethanol plant in Guangxi, increasing capacity to 300,000 tonnes. Total investment in the expansion will be as much as $183 million, according to plant officials. Completion dates fro the expansion project were not released.
In Malaysia, the nation plans to implement the blending of 2 percent biodiesel into petroleum diesel this year, despite concerns over the rising cost of the palm oil feedstock. Frost & Sullivan has projected that biodiesel demand in Malaysia will increase five-fold by 2013 to 563,000 tonnes, and Malaysia is expanding production capacity from 1.04 million tonnes per year to 1.98 million tonnes by year end, but plants were near-idle due to palm oil costs, and most fuel being produced was for export markets governed by mandates, such as the EU.
In the Philippines, Agriculture Secretary Arthur C. Yap confirmed that the country is on track to meet its goal of producing 142 Mgy of ethanol to meet domestic mandates by 2014. The Secretary said that 16 projects have been launched, at a cost of $500 million, with a production capacity of 150 Mgy. He added that biofuels would require a 1,000,000 acre expansion in cropland to provide the sugarcane, sweet sorghum and cassava for ethanol feedstocks, and said that increased productivity was another path to providing feedstocks for the new plants. The country, he said, is also on track to produce enough biodiesel to meet mandates.
In Ireland, EcoOla will invest $36 million to create a canola biodiesel production plant in Thurles. The expansion follows on from the success of the company’s initial production facility in County Cork, which produces biodiesel for city councils and the postal service. Production capacity and completion dates were not disclosed.
In England, D1 Oils said that it would raise up to $60 million in an additional sale of shares, to fund ongoing cash needs as it builds up its jatropha-based biodiesel production capacity. The company said that competition from subsidized US biodiesel had hit the company’s trading margins, resulting in the recent run-down in the share price as well as generating the need for new cash. The company reported a loss of $20 million in its most recent reporting period.
Research News:
In Nebraska, a research team at the researchers at the University of Nebraska released more details on a five-year, 10-farm study on switchgrass production. The research team determined that five farmers achieved average costs of $50 per ton for production, translating to a feedstock price of as little as 58 cents per gallon for switchgrass ethanol. The research team also found that greenhouse gas emissions were reduced by 94 percent in switchgrass production, compared to gasoline emissions. Two farmers in the study, with previous experience growing switchgrass, achieved costs of $39 per ton in the five-year study, or 25 percent below the average for the group, indicating a potential to produce fuel at as low as 44 cents per gallon.
Citigroup Global Markets analyst David Driscoll said that, despite an 11-cent increase in corn prices last week, ethanol margins were holding steady at 18 cents per gallon, an eight-month high. Oil price increases has caused ethanol prices to increase to $2.37 per gallon in spot markets, which allowed producers to maintain their margins. Gasoline futures increased to $2.64 after OPEC said it would not increase production despite record prices and a shortfall in US stockpiles.
Policy and Policymakers:
The United Nations World Food Programme (WFP) said it will need $500 million in extra funding to solve a food crisis in 36 countries, triggered by a 75 percent rise in food prices since 2000. The organization said that new outbreaks of famine were occurring in cities, where food was widely available, but residents could not afford the increased prices. The group said that more than 25,000 Indian farmers committed suicide last year over food shortages and debts, where India was experiencing an all-time low rate of agricultural growth. Meanwhile, an area of fertile soil the size of the Ukraine is disappearing each year because of drought, deforestation and climate change. The group also said that rising oil prices have caused fertilizer costs, which account for 25 percent of US agricultural expense, to rise more than 150 percent in the past five years.
Consumer and Fleet News:
In Oregon, Pepsi’s bottling plant in Eugene has converted its 27-truck fleet to biodiesel. The specific blend ratio was not disclosed, but the company said it was spending up to 5 percent more on diesel costs per year as a result of the conversion, suggesting that it was converting at least at a B20 ration. The company said that its maintenance costs had increased as a result of the conversion.
Financial News:
The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, fell 2.60 percent Friday to 123.99 on weakness in diversified agribusiness. For the day, Archer Daniels Midland (ADM) fell 2.72 percent to $45.01, while The Andersons (ANDE) recovered 0.48 percent to close at $43.98. Among ethanol stocks, Pacific Ethanol (PEIX) gained 6.12 percent to $4.51 while VeraSun Energy (VSE) fell 3.59 percent to close at $6.99. Among small caps, Xethanol (XNL) fell 11.54 percent to $0.46. Declines led advances 5 to 3.
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