China increases farm subsidies by $80 billion to stabilize prices

May 12, 2008

In China, grain prices have been stabilized in the country, via an increase of 30 percent in farm payments and an additional $3.5 billion in seed, fuel and fertilizer aid to farmers. As a result, grain prices have increased by only 1.2 percent.

A change in Chinese meat consumption habits since 1995 is diverting eight billion bushels of grain per year to livestock feed and could empty global grain stocks by September 2010, according to a new study from Biofuels Digest, now available for download here in an expanded version.

The Study, â€œMeat vs Fuel: Grain use in the U.S. and China, 1995-2008â€ concluded that, even if the U.S. ethanol industry were shut down tomorrow, rising Chinese demand for meat, and the ensuing livestock feed demand, will empty global grain stocks as soon as 2013. The report offers gloomy news for policymakers who have hoped to address global food vs. fuel concerns by restraining U.S. ethanol demand.

â€œItâ€™s not food, itâ€™s not fuel, itâ€™s China,â€ said Jim Lane, editor of Biofuels Digest and author of the report.

In China, the Chinese and Italian governments have initiated a feasibility study for jatropha biodiesel at Sichuan University. The project received $650,000 in support from Italy. The project is the third signed by Italy and China, promising cooperation in biofuels research since mid-April. The others covered industrial waste oil-based biodiesel in Hubei Province, and thin-film solar cells in Shanghai.

In Italy, national biodiesel production fell 40 percent for 2007, to 450,000 tons. Production was 750,000 tons in 2006. Producers blamed regulatory changes for the drop, but said that Italy would increase capacity by 750,000 tons through 2009.

Meanwhile in China, experts are warning that plans to produce biofuels in the China’s southwest will threaten biodiversity in the last remaining section of virgin forest in the country. Speakers warned against the planting of jatropha trees, which would threaten native grasses and a diverse range of animal species, said academics attending the International Workshop on Biodiversity and Climate Change in Beijing.

Jatropha continues to be the subject of intense development interest from China. Recent projects include:

â€¢ China Agro-Technology announced that it has secured $300 million in financing for biodiesel acquisitions and operations. The company is focused on building capacity to process jatropha oil to supply the growing demand lower-cost biodiesel
â€¢ In China’s largest state oil company, Sinopec, said it will invest $5 billion in jatropha and palm plantations in Indonesia.