Today in Biofuels: “China eats the world”; GM invests in Mascoma; McCain calls for veto of Farm Bill over subsidies

Top Story:

In an article titled “China Eats the World”, part of Biodiesel 2020, author Will Thurmond finds that “China is eating a disproportionately large volume of the world’s oilseeds. In the last decade, China’s soybean imports skyrocketed from 0.8 million metric tons in 1994 to 27 million metric tons in 2005, an almost 27-fold increase.” Thurmond adds that “China’s needs for soybeans are growing faster than the top three producing nations in the world (US, Brazil and Argentina) can feed them.” Thurmond’s article predated yesterday’s report “It’s not Food, it’s not Fuel, it’s China” on China’s impact on global corn grain supply and demand.

Producer News:

In New Hampshire, General Motors and Mascoma announced a strategic relationship to develop cellulosic ethanol, which included an undisclosed equity investment in Mascoma by GM. Mascoma’s single-step biochemical process has received support from a host of high-profile investors and partners including the Department of Energy, Khosla Ventures and Kleiner, Perkins.  The investment by GM is the second in cellulosic ethanol, following its partnership with Coskata earlier this year.

In Iowa, Penford Products is nearing completion of its $42 million, 40 Mgy corn ethanol plant near Cedar Rapids.  Construction commenced on the facility in November 2006, and the plant is expected to be fully operational this month.

In Illinois, Aventine Renewable Energy announced a quarterly loss of $10.8 million after recording a $21.6 million impairment charge for a short-term investment in auction-rate securities that was reclassified as long-term. Excluding the charge, Aventine earned $10.8 million, or 26 cents per share, down from $14.9 million in the corresponding period last year. Analysts polled by Thompson Financial had expected earnings of 8 cents per share. Revenues for the quarter rose 16.,7 percent to $509.9 million, beating analyst expectations of $480 million. Shares of Aventine fell 2.05 percent on the news.

International News:

Kenya will recommence blending sugar cane ethanol with gasoline in an effort to combat high oil prices. The country had stopped a similar program that ran from 1983 and 1993 because of the high cost of ethanol at the time. The permanent secretary for energy said that the ministry had developed a jatropha-based biodiesel strategy that would provide increased income for farmers, as well as 500 gallons per acre planted, producing more income than for coffee cultivation.

In Myanmar, “Biofuel by Decree: Unmasking Burma’s bio-energy fiasco,” was released by the Ethnic Community Development Forum, detailing the use of forced labor and land confiscation to plant 8 million acres with jatropha to provide a solution to Myanmar’s fuel crisis. The report is based on government documents, media reports, and 131 interviews conducted in Myanmar between November 2006 and April 2008. The report said that individuals “have been fined, beaten, and arrested for not participating.”

In Canada, the House of Commons approved a procedural vote supporting a five percent biofuels mandate for ethanol commencing in 2010 and a B2 biodiesel mandate for 2012. The bill faces a final vote in the House and will require passage in the opposition-dominated Senate. The bill will create a market of 750 Mgy of ethanol and 158 Mgy for biodiesel.

World Opinion:

A release by Poet quotes U.S. Secretary of Agriculture Ed Schafer:  “Secretary Schafer said only about 25 percent of the corn crop goes to make ethanol and that the forces driving rising prices in corn and other commodities has more to do with energy costs, increased consumption around the world and weather-related production problems. Critics who blame high food prices on US policies they claim encourage corn to be diverted from food and livestock feed to alternative fuels are “flat out wrong”, Shafer said.”

Jim Cramer on Mad Money said “I’m in his camp. I’m for Tyson Foods and its crusade against ethanol,” following comments by Tyson CEO Richard Bond , who said “It is inefficient because it raises the price on feed stocks to artificially high levels, which increases costs for other uses, such as food. Essentially, it’s a regressive tax on the poor, and not only the poor in America. Ethanol mandates and subsidies along with tariffs on ethanol imports are causing a world food crisis.”

Research News:

In Washington, the chief economist at the Department of Agriculture said that ethanol subsidies have had an “important impact” on corn prices, saying that retail food prices increased by 4 percent in 2007 and will increase by 4 to 23.,5 percent in 2008. Joseph Glauber added that ethanol had little to do with increasing wheat and rice prices, attributing those rises to Chinese demand, and Australian and Canadian crop failures.

Policy and Policymakers:

In Iowa, Senator John McCain said that, as drafted, he would veto the Farm Bill because of excessive subsidies, which he called unnecessary. McCain added, “The farmer in the state of Iowa and the United States of America is the most productive, the most efficient and the best, and I will open every market in the world to your products and I will sell them.”

Consumer and Fleet News:

John Deere has approved B100 for use in its PowerTech and PowerTech Plus Stage IIIa engines, and earlier designs. The company said that it was approving the use of biodiesel rather than cold pressed rapeseed oil, and that the approval was subject to proper handling and storage of fuels and use of a John Deere B100 additive.

Financial News:

The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, fell 1.84 percent to close at 120.08, as a third day of major declines in agribusiness matched a renewed spiral in ethanol stocks.  For the day, Archer Daniels Midland (ADM) fell 1.97 percent to close at $43.19, while Aventine Renewable Energy (AVR) fell 2.05 percent to $4.30 to lead the ethanol trend. Among small caps, Green Energy Resources (GRGR.PK) gained 14.29 percent to finish at $0.16.   Overall, advances led declines 5 to 4 for the day.