Biofuels Digest Index plunges 3.86 percent on ethanol mandate repeal fears
April 30, 2008
The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, plunged 3.86 percent to close at 126.26, on slumping agribusiness and falling ethanol stocks as fears grow over a repeal of the ethanol mandate. For the day, Archer Daniels Midland (ADM) fell 3.88 percent to $45.58 after the release of quarterly earnings, while Aventine Renewable Energy (AVR) fell 7.47 percent to $4.09 to lead an ethanol downhill sprint. Among small caps, Xethanol (XNL) gained 2.63 percent to close at $0.39. Overall, declines led advances 4 to 1 for the day.
India’s Uttar Pradesh state government OKs ethanol made from sugar cane, as sugar price slump continues
April 30, 2008
In India, the state government of Uttar Pradesh has given the go-ahead to sugar mills to produce ethanol directly from sugarcane. Previously, ethanol could only be produced from molasses, an intermediate step that made commercial scale ethanol production economically unfeasible. The move will also allow sugar cane farmers to lessen the impact of the global slump in sugar prices. The move comes as India is expected to move from a 5 percent to 10 percent biofuel blend in October.
India is projected to have a surplus of 11.5 million tonnes, based on a projected 33.15 million tonnes harvest this year, which would be a world record for national sugar production. Recently, 10 sugar-producing states have agreed to a framework for a national E10 mandate. India’s sugar crop this year is expected to exceed 29 million metric tons. With domestic consumption at 19 million tons and exports at 1.5 million tons, the country is turning to ethanol production to avoid a catastrophic sugar glut.
India announced an E10 mandate that would take effect in October 2008. The Indian Minister of Agriculture previously called a meeting of sugar-producing states to establish a framework for cooperation, as chaos has descended on the sugar industry in coping with differing regulations by state. Maharashtra state will remove its interstate export fee on ethanol, to help make production of ethanol from sugar economically viable. The national government is considering reducing or removing taxes on ethanol for the same reason. But Bihar and Uttar Pradesh states have imposed a $0.20 per gallon tax on ethanol exported to other states.
Bharat Petroleum, Hindustan Petroleum and Indian Oil have agreed to acquire up to 35 per cent of Brazilian ethanol producers Louis Dreyfus Commodities Bioenergia and Infinity, and 50 percent of Rezek. The companies will invest $600 million in new land acquisition and plant expansion funds. Initially, the companies had hoped to export ethanol to India, but scrapped plans after concerns were raised by Indian sugar producers.
The three Indian oil companies were among ten companies seeking to bid on closed government sugar mills in Bihar state. The mills would be used to increase ethanol production to meet the Indian government’s existing E5 mandate and proposed E10 mandate scheduled to take effect in October 2008.
Fiat to debut ethanol-powered truck engine in 2010; cost, emission reductions seen for biofuel producers
April 30, 2008
In Brazil, Fiat Powertrain Technologies said it will launch a new ethanol-powered engine for trucks and agriculture machinery engine in 2010. The engine will reduce costs for ethanol producers by allowing them to run on their own ethanol fuel at cost, instead of purchasing retail diesel. The engine will be an adaptation of existing technology, and will use a nominal amount of diesel fuel for initial ignition, and subsequently run the engine on ethanol fuel. Fiat said that the two fuels would not be mixed except in the combustion chamber, because of safety concerns.
Minnesota awards $150K to Chippewa Valley Ethanol to evaluate heat-from-corn cob energy process
April 30, 2008
In Minnesota, the state Department of Commerce’s Office of Energy Security awarded $150,000 to Chippewa Valley Ethanol for an evaluation of the plant’s process for producing energy from corn cobs. The plant utilizes the cobs to provide heat for the plant, in lieu of natural gas.
In Minnesota, the state government is preparing plans for ending subsidies to ethanol plants in the state. The last payments, under a state plan designed to incentivize ethanol production in the state, are scheduled for 2010, and only six plants are still receiving per-gallon incentive payments.
Minnesota has an E-20 mandate that will take effect in 2013. Currently Minnesota has an E10 mandate in place, and was the first state (in 2005) to establish an E10 standard. Implementation of the E20 mandate is contingent on obtaining federal approval to use E20 blends.
In Iowa, Poet has been developing its cellulosic ethanol plant in Emmitsburg, jointly funded with the US Department of Energy, that will produce 25 Mgy of corn from corn fiber and cobs.
The plant, which will be operational in 2011, will pay between $30 and $60 per ton of cobs and fiber for the 850 tons per day required by the plant. The cob price equates to a price of $0.63 and $1.26 per bushel, compared to $3.60 per bushel for corn.
Today in Biofuels: $1.01 US tax credit for cellulosic ethanol proposed in Senate; Florida moves to E10; Brazil’s Brenco to raise $3.2 billion in IPO
April 29, 2008
Top Story:
A report from Raymond James analyst Pavel Molchanov said that “the reduction in the [ethanol] tax credit is not likely to have a direct impact on ethanol producer margins, if only because the economics of the credit are currently being captured in their entirety by the blenders.“ The Senate has proposed that the cellulosic ethanol tax credit be set at $1.01 per gallon, expiring in 2012. Commenting on the impact of the food-vs-fuel debate, Molchanov said ” The reduction in the tax credit for corn ethanol has been discussed in Washington before, and we do not view this decision as a direct response to the recent global food price escalation. It is possible that the changing political landscape surrounding biofuels may result in this credit sunsetting altogether in 2010. The prospects of its extension will depend in part, on the trend of corn prices between now and then. More near term, at year-end 2008, the $0.54/gal ethanol tariff will expire unless extended. As we noted on April 16, we believe that there is now at least a 50% chance that the tariff will in fact, be allowed to expire.”
Producer News:
In New York, Masada said it is awaiting a green light from the the city council of Middletown to proceed with a 10 Mgy waste-to-ethanol plant. The plant, which was originally proposed in 1996, has cost more than $40 million in its development phase, according to the Times-Record. The plant is scheduled for completion this December but the relationship between the city and Masada has deteriorated, with the city filing a lawsuit and Masada filing for arbitration.
The National Biodiesel Board is at a loss to explain skyrocketing soy prices. “It’s not following any linear economic path,” Amber Pearson, a spokesperson for the National Biodiesel Board, told news.com as soy prices have doubled in the past two years, to 60 cents a pound. The NBB said that numerous plants had been idled by high prices, while Fred Tennant of PetroAlgae said “The numbers are impossible.” The NBB is at a loss to explain why prices have risen so dramatically when available stocks of soy are close to all time highs. “”Maybe some of the (price increases) are due to speculations and futures markets,” Pearson said.
Indiana Ethanol Power has commenced contract negotiations with Lake County Solid Waste Management District for its proposed 20 Mgy waste-to-ethanol plant. The plant will use the GeneSyst process to convert solid waste to ethanol. Construction is expected to commence in 2008, and production in 2010.
International News:
In Brazil, Brenco said that it expects to raise $3.2 billion from an IPO no later than 2009, and will use the proceeds to construct 10 ethanol plants by 2015 with a planned capacity of 1 billion gallons per year. The company has invested more than $1 billion to date in the construction of four plants in Mato Grosso, Mato Grosso do Sul and Goias, from proceeds of private placements that have snagged investors such as Vinod Khosla, Ron Burkle, and Goldman Sachs. The company will construct a 650-mile pipeline from Mato Grosso to Santos in an additional $1 billion investment.
In Canada, the New Democratic Party leadership has proposed an amendment to Canadian biofuels legislation that would require a study on ethanol and food scarcity. The amendment is proposed to Bill C-33, itself an amendment to the Environmental Protection Act, that would require 5 percent of all fuel to come from biofuels by 2010. The legislation is supported by the Conservative and Liberal parties.
In Angola, Norwegeian oil company StatoilHydro announced a partnership with Sonangol to produce biodiesel, as soon as Angolan legislation clears the way for the venture. Capacity and timelines were not disclosed; Statoil has been long active in Angolan oil exploration.
World Opinion:
The UN Special Rapporteur on the Right to Food, Jean Ziegler, described US and EU biofuels policy as a “criminal path.” The AP reported that a transcript of a briefing to UN leaders, Ziegler said that “fuel policies pursued by the US and the EU were one of the main causes of the current worldwide food crisis.” The AP reported: “He also said that speculation on international markets was behind 30 per cent of the increase in food prices. He said that companies such as Cargill, which controls a quarter of all cereal production, have enormous power over the market. He added that hedge funds are also making huge profits from raw materials markets, and called for new financial regulations to prevent such speculation.” Reuters reported this morning that the UN and World Bank have set up a task force on global food prices, and warned countries not to hoard food.
From the Canberra Times: “The supposed crimes of biofuels are manifold. They’re behind soaring global commodity prices, the destruction of the Amazon rainforest, increased rather than diminished greenhouse gases, food riots in Haiti and Indonesian deforestation. Most of this, to borrow a farm image, is hogwash and bilge…If Asian rice prices are soaring, along with the global prices of wheat and maize, it’s not principally because John Doe in Iowa or Jean Dupont in Picardy has decided to turn yummy corn and beet into ethanol feedstock. Much larger trends are at work which dwarf the $US40 billion biofuel industry. I refer to the rise of more than one-third of humanity in China and India, the disintegrating dollar and soaring oil prices….Their demand for food staples and once unthinkable luxuries like meat is pushing up prices.”
Research News:
Monsanto will provide crop-testing, breeding and seed-production services to the Bioenergy Seeds & Feedstocks unit of Mendel Biotechnology in new partnership just announced. Mendel will apply the techniques to unique Chinese strains of miscanthus it owns, in hopes of introducing high yield biofuel miscanthus to the US market. Both Monsanto and BP own stakes in Mendel.
Policy and Policymakers:
In Florida, legislation is expected to come to a vote Friday mandating E10 throughout the state by the end of 2010. The 10×10 legislation may be unnecessary, according to local reports that pure gasoline will becoming difficult to find after ExxonMobil and BP commence selling E10 at their Florida stations next week. Shell commenced selling E10 in March, and Chevron will follow in July. Hess was the first major retailer to convert, making the switch late last year.
Consumer and Fleet News:
UK transport company H. Wragg Transport Ltd has converting its fleet of fifteen 44-tonne tractor units to Verdant Fuel, a canola-based fuel oil which achieves 70 percent reductions in greenhouse gas emissions. The “pure plant oil” was evaluated in a pilot test before full conversion. The trucks have been modified to hold secondary tanks, so that they start on conventional diesel and switch over during operation to running biofuels.
Financial News:
The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, gained 0.21 percent to close at 131.33, on gains in agribusiness offset by ethanol setbacks. For the day, The Andersons (ANDE) rose 1.36 percent to $46.25, while Pacific Ethanol fell 5.58 percent to $3.72 to lead the ethanol downtrend. Among small caps, Earth Biofuels (EBOF.OB) gained 13.81 percent to close at $0.0239. Overall, advances and declines were even for the day.
Senate proposes $1.01 per gallon ethanol tax credit; ethanol tariff 50/50 chance of expiring this year, analyst projects
April 29, 2008
A report from Raymond James analyst Pavel Molchanov said that “the reduction in the [ethanol] tax credit is not likely to have a direct impact on ethanol producer margins, if only because the economics of the credit are currently being captured in their entirety by the blenders.”
The Senate has proposed that the cellulosic ethanol tax credit be set at $1.01 per gallon, expiring in 2012. Commenting on the impact of the food-vs-fuel debate, Molchanov said ” The reduction in the tax credit for corn ethanol has been discussed in Washington before, and we do not view this decision as a direct response to the recent global food price escalation.
However, as we argued in our April 16 industry brief titled “Ethanol & Biodiesel Update: Wave of Food Price Concerns May Spur Policy Responses,” it is possible that the changing political landscape surrounding biofuels may result in this credit sunsetting altogether in 2010. The prospects of its extension will depend in part, on the trend of corn prices between now and then. More near term, at year-end 2008, the $0.54/gal ethanol tariff will expire unless extended. As we noted on April 16, we believe that there is now at least a 50% chance that the tariff will in fact, be allowed to expire.”
The tax credit will be part of the finalized Farm Bill.The bill contains $900 million for biofuels development, $900 million for nutrition programs aimed to offset higher food prices, while land stewardship programs would received an additional $4 billion, and specialized crops $1.35 billion.
Earlier this month, the US House of Representatives had voted to extend the existing Farm Bill until April 25 to give lawmakers more time to resolve differences between the House and Senate versions of the new Farm Bill, which includes tax breaks and incentives for biofuels. The current law expires on April 18. President Bush has stated that he will not sign legislation extending the current Farm Bill for another year.
The Farm Bill was passed by the Senate in in the fall, while the House version passed in July. Senate Agriculture Committee chairman Tom Harkin said the bill would earmark $1.3 billion for biofuels over the next five years.
The Senate passed an overall funding measure on October 5, but the Agriculture Committee under committee chairman Tom Harkin had been working on specific program allocations until November, 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.
President Bush has raised the threat of a Farm Bill veto, the first since 1956, over subsidies. Among those in hot dispute is the Brazilian ethanol tariff, which protects US ethanol producers but creates higher prices in the US and retards US ethanol demand growth.
Today in World Opinion: US, EU biofuel policy a “criminal path” according to UN Special Rapporteur; anti-speculative legislation proposed
April 29, 2008
The UN Special Rapporteur on the Right to Food, Jean Ziegler, described US and EU biofuels policy as a “criminal path.” The AP reported that a transcript of a briefing to UN leaders, Ziegler said that “fuel policies pursued by the US and the EU were one of the main causes of the current worldwide food crisis.” The AP reported: “He also said that speculation on international markets was behind 30 per cent of the increase in food prices. He said that companies such as Cargill, which controls a quarter of all cereal production, have enormous power over the market. He added that hedge funds are also making huge profits from raw materials markets, and called for new financial regulations to prevent such speculation.” Reuters reported this morning that the UN and World Bank have set up a task force on global food prices, and warned countries not to hoard food.
From the Canberra Times: “The supposed crimes of biofuels are manifold. They’re behind soaring global commodity prices, the destruction of the Amazon rainforest, increased rather than diminished greenhouse gases, food riots in Haiti and Indonesian deforestation.
Most of this, to borrow a farm image, is hogwash and bilge…If Asian rice prices are soaring, along with the global prices of wheat and maize, it’s not principally because John Doe in Iowa or Jean Dupont in Picardy has decided to turn yummy corn and beet into ethanol feedstock. Much larger trends are at work which dwarf the $US40 billion biofuel industry. I refer to the rise of more than one-third of humanity in China and India, the disintegrating dollar and soaring oil prices. Hundreds of millions of people have moved from poverty into the global economy over the past decade in Asia. Their demand for food staples and once unthinkable luxuries like meat is pushing up prices.”
Florida legislature mulls E10 legislation Friday; Chevron, Shell, Exxon, BP and Hess move to E10 in Florida by July
April 29, 2008
In Florida, legislation is expected to come to a vote Friday mandating E10 throughout the state by the end of 2010. The 10×10 legislation may be unnecessary, according to local reports that pure gasoline will becoming difficult to find after ExxonMobil and BP commence selling E10 at their Florida stations next week. Shell commenced selling E10 in March, and Chevron will follow in July. Hess was the first major retailer to convert, making the switch late last year.
The Florida state legislature began consideration of a bill last month that would create a seven-member Florida Energy and Climate Commission. The bill would also create a cap-and-trade system for reduction of greenhouse gas emissions by utilities, a renewable portfolio standard requiring 2.25 percent use of renewables by utilities commencing in 2009, and green-friendly construction standards and procurement policies.
In related infrastructure news, Kinder Morgan’s Central Florida Pipeline will commence delivering ethanol by pipeline between the Port of Tampa and Orlando Airport. The first test batch will be delivered in the third quarter after replacement of pumps, seals, and gaskets, to a 23 million gallon storage facility established in Orlando.
National Biodiesel Board at loss to explain doubling of soy prices; reserves at high levels; blames speculators
April 29, 2008
“It’s not following any linear economic path,” Amber Pearson, a spokesperson for the National Biodiesel Board, told news.com as soy prices have doubled in the past two years, to 60 cents a pound. The NBB said that numerous plants had been idled by high prices, while Fred Tennant of PetroAlgae said “The numbers are impossible.” The NBB is at a loss to explain why prices have risen so dramatically when available stocks of soy are close to all time highs. “Maybe some of the (price increases) are due to speculations and futures markets,” Pearson said.
“I think you have a perfect storm of things coming together,” World Bank president Robert Zoellick told NPR. “You have high energy prices. You have the increase in demand from some of the developing countries. … As the Indian commerce minister said to me, going from one meal a day to two meals a day for 300 million people increases demand a lot.”
Leading the price rise was crude oil, which reached a record $120 yesterday. Crude palm oil reaching $1079 per tonne, soybeans at $13.56 per bushel for May delivery, wheat at $9.23 per bushel and corn at $5.94 per bushel for May delivery. A Goldman Sachs research report projected that soy prices would rise to $15.30 in six months, and that wheat would peak at $11.50 per bushel in the same time period.
Commenting on the oil market, Stephen Schork, president of the Schork Group, told Oil Voice that reported that “This is a market that’s being driven by speculation as much as it is by the fundamentals.â€
New Democratic Party proposes food impact study, as Canada prepares to pass 5 percent biofuels mandate
April 29, 2008
In Canada, the New Democratic Party leadership has proposed an amendment to the Canadian biofuels legislation that would require a study on ethanol and food scarcity. The amendment is proposed to Bill C-33, itself an amendment to the Environmental Protection Act, that would require 5 percent of all fuel to come from biofuels by 2010. The legislation is supported by the Conservative and Liberal parties.
Canada’s biofuel poicy has been robustly pursued at the provincial level. Prince Edward Island Development Minister Richard Brown told CBC last month that the Atlantic provinces are set to establish a unified standard for biofuels, which may include a minimum blending percentage or tax incentives.
The Prince Edward Island environmental and renewable industries committee recommended that the province should create an “aggressive biofuels portfolio” for the province. The committee said that the policy would diversify the provincial energy mix, improve the economy, and assist in meeting meet greenhouse gas emission targets. The committee identified extensive cellulosic biomass feedstocks such as wood, grasses, straw and crop residues that could be utilized for fuel, heat and power.
The Canada West Foundation released a report calling on the Canadian federal government and provincial governments to synchronize their programs, jurisdictions and emissions targets. The study pointed out that four Atlantic provinces and two territories have not set greenhouse gas emission targets, while five provinces that have established goals have different targets and dates.
In addition, three provinces have established different cap-and-trade systems for trading emission credits.
Recently, the province of British Columbia unveiled an ambitious plan to achieve energy self-sufficiency and zero net greenhouse gas emissions by 2016. The province outlined plans to spend $25 million on a BioEnergy Network to spur biofuels investment, a well as $10 million to stimulate biodiesel production., The province plans to use timber killed by the mountain pine beetle, waste wood, and agricultural residue as feedstocks.
Overall, the Canadian provinces have set the following targets and policies:
- Ontario has an emissions reduction target of 12 percent below 1990 levels by 2014.
- Manitoba has an emissions reduction target of 12 percent below 1990 levels by 2012, and is advocating a national cap-and-trade system.
- Saskatchewan has an emissions reduction target of 22 tonnes per capita by 2020 and 80 percent reduced from 2007 levels by 2050, and has rejected cap-and-trade.
- Alberta has an emissions reduction target of by 14 percent from 2005 levels by 2050.
- British Columbia has an emissions reduction target of 33 percent below 2007 levels by 2020, and 80 per cent below 2007 levels by 2050. The province plans to introduce a cap-and-trade system this year.
- Prince Edward Island has no emissions targets.
- Newfoundland has no emissions targets.
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