Today in Biofuels: Vinod Khosla TKOs American Petroleum Institute in “Food Fight”; EU Biofuels Road Map; US Fed says labor, energy costs driving food prices; ethanol tariff update

Top Story:

In New York, Vinod Khosla and Big Oil conducted a “food fight” at the Wall Street Journal’s ECO:nomics conference, where  Khosla accused the American Petroleum Institute for linking food price increases to ethanol production, saying ““The API started issuing press releases about food. Suddenly they got interested in the welfare of poor Africans.” “We have never said anything about ethanol being responsible for food prices,” said American Petroleum Institute President Red Cavaney. “It was Federal Reserve Chairman Ben Bernanke in recent Congressional testimony who linked a 4.5% increase in food prices to rising worldwide demand and the amount of corn going to ethanol.” Khosla suggested government rules mandating that service stations dispensing more than $5 million worth of fuel a year should have E85 pumps.

Producer News:

In Pennsylvania, the Conoy Township board of Supervisors in Lancaster County granted zoning approval for a new 60 Mgy ethanol plant. The supervisors voted 3-2 to grant a conditional-use permit, based on 77 conditions,  to the $120 Lancaster Biofuels project after five months of hearings. Opponents said they are considering a court challenge. Lancaster Biofuels said that if air, water and land permits are secured, the plant expects to commence operations as soon as 2010.

In Georgia, Range Fuels has raised $100 million for its 100 Mgy cellulosic ethanol plant. The first phase of the plants operations would take its woodchip-to-ethanol process to 20 Mgy capacity. The company’s process converts solid waste into gas, which is then converted into alcohol. The process is similar to the Fischer-Tropsch process, first developed in 1920.

In Minnesota, the SoyMor Biodiesel plant in Glenville shut down production, citing the high cost of soybean oil and the weak US dollar. The plant had been operating at 50 percent capacity since November.

International News:

In Belgium, the seven institutions of the Refuel Project presented their EU biofuels roadmap at the World Biofuel Markets conference in Brussels. The report said that the EU can meet its 10 percent biofuels target by 2020 with first-generation feedstocks and fuels based on existing technology, without major agricultural land use changes. The report said that next-gen biofuels would increase greenhouse gas emissions reductions, but would require several policy changes to have impact.

In Canada, the federal government has approved a $500 million cellulosic ethanol project plan by Iogen Corp for construction in Saskatchewan. Iogen execs said that they hoped to launch the 23 Mgy plant north of Saskatoon by 2011, using wheat straw and other cellulose as feedstock.  Iogen is backed in the venture by Shell, Goldman Sachs and Petro Canada.

In South Africa, Rainbow Nation Renewable Fuels has readied an application to construct a 76 Mgy soy-based biodiesel plant in Coege, Eastern Cape province. The Australian-based project developer said that they hoped to commence construction by 2009, and expected to be using soybean oil made exclusively in South Africa within five years.

In Brazil, the Mines and Energy Minister said that the government may move up the date for implementation of a B5 mandate to 2010, from 2013. The minister said that the country has an existing capacity of 661 Mgy, enough biodiesel to support a blend as high as 6 percent biodiesel.

Research News:

The Federal Reserve Bank of Kansas City released a report saying that the marketing has increased from 59 percent of food cost in 1959 to 80 percent today, due to labor and energy costs. The Fed said that labor and energy now make up 42 percent of the cost of food, while farm value is 19 percent. In commenting on the report, Ron Litterer, president of the National Corn Growers Association (NCGA) told the Grand Island Independent that the “USDA reports that farmers receive 19 cents from every dollar spent on a bag of wheat flour, but only 5 cents from a dollar spent on a loaf of bread and just 4 cents from a dollar spent on a box of corn flakes”.

Policy and Policymakers:

In Brazil, the president of the Brazilian Sugarcane Industry Association proposed that the US establish a variable ethanol tariff linked to the price of oil, if it would not abolish the ethanol tariff altogether. Proponents of the tariff repeal, who range from Sen. Charles Schumer (D-NY) and Sen. Richard Lugar (R-Ind) to Federal Reserve Chairman Ben Bernanke, say that increased Brazilian imports will reduce the overall cost of fuel, relieve pressure on food prices, and reduce US dependence on foreign oil. Opponents, led by Sen. Charles Grassley (R-IA) said that repealing the tariff would cause US taxpayers to subsidize Brazilian ethanol (as it would qualify for the 51-cent blenders credit), and said that Brazilian ethanol could be imported duty-free so long as it is partially processed in the Caribbean, under the Caribbean Basin initiative.

In Belgium, the “Agrofools” group padlocked and chained four sets of doors at the World Biofuel Markets conference, and battled with security to chain a fifth door before being arrested. The outside gates were chained shut by the Rhythms of Resistance group before being dispersed by police. The protesters were opposing the use of biofuels as a solution for reducing dependence on oil.

Consumer and Fleet News:

In Hawaii, the county of Kauai will pilot test a B20 biodiesel blend in the county fleet. The test will be conducted over two months using biodiesel supplied by Kaua‘i Farm Fuel.

Financial News:

The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, fell 1.32 percent yesterday to close at 120.50 as diversified agribusiness and ethanol slipped on general market weakness.   For the day, The Andersons (ANDE) tumbled 4.55 percent to close at $42.17, while among ethanol stocks Verasun Energy (VSE) dropped 5.71 percent to a 52-week low of $6.27 despite strong earnings. Pacific Ethanol (PEIX) fell 11.55 percent to $4.75.  Among small caps, Xethanol (XNL) gained 6.80 percent to close at $0.4699.  Declines led advances 5 to 1.

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