Daily Biofuels Summary for October 15: Consumer poll finds oil, not ethanol, blamed for food price increases

Top Story: A new Harris poll found that 88 percent of US adults agreed that the U.S. should pursue renewable energy sources. 72 percent said that higher oil prices have had a substantial impact on food prices, compared to only 35 percent who believe the same for ethanol.  78 percent said they believe ethanol usage would lessen the country’s dependence on foreign oil.

Producer News: In Iowa, Magellan Midstream Partners opened its new biodiesel blending plant at Clear Lake. Magellan owns an 8,500-mile oil pipeline system that traverses from the Gulf Coast to the Midwest. The new facility will blend B2, B5, B10 and B20, and includes a 84,000-gallon tank. Magellan’s facility for rack blending, as opposed to the splash blending technique, will provide better fuel mixing in cold weather, accuracy, and one-stop biodiesel loading. Magellan is also constructing a 145,000-barrels of biodiesel storage facility at its New Haven, Connecticut terminal, and later this year will test transportation of a biodiesel blend via pipeline from Houston to Dallas….In Indiana, the Star-Press reported on the status of Indiana’s struggling ethanol industry.  Five of Indiana’s six ethanol refineries opened in 2007 and six more are scheduled to open in 2008, but a lack of infrastructure to distribute ethanol has strained plant economics. A recent USDA ethanol transportation report showed that 75 percent of new orders for rail cars are for ethanol, but the manufacturing backlog has increased from 36,000 rail cars, up from 10,000 rail cars in the third quarter of 2005….In Minnesota, Agassiz Energy announced a suspension of its $115 million ethanol plant project near Erskine owing to financing difficulties associated with high corn costs and reduced ethanol prices….In Connecticut, CT Biodiesel presented plans for its 50 Mgy biodiesel plant proposed for Suffield. Many residents appeared opposing the plant for causing local disruption, while supporter said it would become the largest taxpayer in town and would donate $130,00 in fuel each year which be used for town buildings and vehicles.

International News: In Canada, construction is about to begin on Canadian Bioenergy’s 60 Mgy biodiesel plant northeast of Edmonton. Construction is set to begin Monday on Canada’s first large-scale plant to convert canola oil into organic diesel. The $90-million plant will commence operation in 2009. The Canadian government recently announced a B2 mandate effective in 2012, representing an increased biodiesel demand of 210 million gallons….In India, Naturol Bioenergy will start production Kakinada, Andhra Pradesh as the first biodiesel plant in the country. The 30 Mgy plant will be dedicated to production for export markets….In New Zealand, Ecodiesel announced a commercial-scale tallow-based biodiesel plant. The 5 Mgy plant will will commence operation in 2008 and will increase production to 10 Mgy in 2009. New Zealand produces about 143,000 tons of tallow each year, which can be converted to 33 Mgy of biodiesel….New Zealand Prime Minister Helen Clark committed the government to use B10 blends or electric power for 80 percent of its fleet by 2015….Greenpeace’s Nordic section general secretary called on Finland’s Neste Oil to exit biodiesel fuel production. Greenpeace said that palm oil cultivation in Indonesia and Malaysia destroys rain forests, and speeds up climate change. Greenpeace Finland called for biofuels to be employed only when they can be manufactured in a sustainable manner….In Mauritius, the government has commenced conversion of the island nations sugar plants to a flexi-factories that will produce refined sugar or biofuels depending on market conditions. Europe has typically purchased more than 90 percent Mauritius’ sugar production at fixed prices, but guaranteed prices are expected to drop 36 percent by 2009 as Europe reforms its sugar market.

Research News: CIMB Research increased its forecast for palm oil prices to $760 per tonne in 2007 and $810 in 2008. This represents a 60% price increase in 2007 and 8.5% in 2008. They pointed to increased biofuels and food-related demand, and bad weather, were responsible for the increases.  The company indicated that B2 mandates going into effect in Brazil and Italy in January 2008 would continue to increase demand for crude palm oil.

Policy and Policymakers: The Nebraska Corn Board announced that it will launch “Powering Nebraska’s Economy with Corn,”  a statewide radio and print advertising campaign aimed at rural and urban consumers….The US Farm Bill is taking shape, with the Senate expected to begin debate on October 23. The House Bill passed in July. The Senate passed an overall funding measure on October 5, but the Agriculture Committee under committee chairman Tom Harkin has been working on specific program allocations, which include ethanol tax credits and next-generation biofuel investments. The Senate finance committee previously proposed cutting the ethanol tax credit to 46 cents per gallon.

Consumer and Fleet News: In Nevada, the first B100 biodiesel jet test flight was successfully conducted at Reno. The test was conducted on the BioJet, a retired Czechoslovakian L-29 military aircraft. Flight tests were conducted at altitudes of up to 17,000 feet, and showed no material difference in performance compared to kerosene, which is used for jet fuel….In Florida, the city of Palm Bay said that their B20 conversion saved eight cents per gallon, and reduced gas emissions by 25 percent. The city converted 141 of its heavy diesel vehicles over the summer. Overall fleet savings were $12,000. The Brevard County school district converted 130 buses in late summer 2006.

Financial News: Friday, the Biofuels Digest Indexâ„¢, a basket of public biofuels stocks, reached a record 104.22 as a two-week long rally continued. The index has risen from 96.67 on October 3rd, an increase of more than 7 percent. Diversified companies such as Archer-Daniels-Midland (ADM) and The Andersons (ANDE) gained 1.66% and 2.11% on the day to close at $35.48 and $47.39 respectively. Pure-play Big Ethanol stocks lost ground Friday, with VeraSun (VSE) down 4.287% to close at $11.63, and Pacific Ethanol (PEIX) down 4.04% to $9.03, amidst continuing concerns about high corn costs and low ethanol prices. Small-cap stocks were generally down as losers led winners 3 to 2 for the day.