China Curbs Corn Biofuel Growth Amid Grain Price Worries

Dec. 20, 2006
Encourages use of non-grain vegetation to make ethanol

China has banned further expansion of ethanol production from corn amid concern that the industry's demand for raw materials has fueled record-high grain prices, state media said Dec. 20. he country's top economic planning body has ordered local governments to cease approving any new projects that process corn for biofuel, the official Xinhua news agency said.

Growing demand has fueled a 6.8% rise in the price of corn this year and created pressure for farmers to expand corn production at the expense of other needed crops, it said.

Prices of major grain products such as rice, flour and cooking oil grew 4.7% in November, Xinhua said, citing government statistics. Much of this was due to soaring use of corn for biofuels and as livestock feed amid a growing Chinese appetite for meat products, Xinhua said. China currently produces 1.02 million tons of ethanol annually, with 76% derived from corn. It said China processed more than 23 million tons of corn for such industrial uses in 2005, an increase of 84 % over 2001. However, corn output increased just 22% over the same period.

Ethanol mixed with gasoline is sold in five provinces and 27 cities in China, and accounts for 20% of gasoline consumption, Xinhua said.

The National Development and Reform Commission instead encouraged increased use of non-grain vegetation to make biofuels. China said Dec. 18 it had launched a series of pilot programs for farmers to plant non-grain crops such as sorghum and cassava for use in biofuels to preserve grain stocks. Non-grain crops could eventually produce up to 300 million tons of ethanol a year, according to an NDRC report.

China, which relies mostly on heavily polluting energy sources like coal, has set a goal of producing about six million tons of cleaner-burning substitutes such as ethanol by 2010 and 15 million tons by 2020.

Copyright Agence France-Presse, 2006

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