China To Limit Use Of Grain For Biofuel

Citing concerns over surging prices despite a likely record grain harvest, China’s government has signaled its intention to protect food supplies by limiting the use of corn and wheat for production of biofuels.

“We have a principle with regard to biofuel: it should neither be at the cost of food grains for people’s consumption nor should it compete with grain crops for cultivated land,” Yang Jian, director of the Agriculture Ministry's development planning department, tells the China Daily.

Yang makes it clear that his ministry does not support using corn, or any other grain crops, as raw material to produce biofuel.

But since biofuel can help raise farmers’ income and quench the thirst for cleaner energy, the ministry encourages them to grow sorghum, cassava and other non-grain crops on slopes and patches that are unfit for grain production, he says.

According to the China Daily, it was the first time the ministry has explicitly stated its policy on production of biofuel, whose surging demand has contributed to recent price hikes in the food market.

Over the past month, China’s domestic corn prices have jumped about 20% to levels not seen since 1997.

In a separate report, the government's top planning agency reaffirmed that all new fuel ethanol plants and any projects to expand existing plants must be approved by the government, the official Xinhua news agency reports.

The National Development and Reform Commission (NDRC) also called for an immediate halt to approval of new corn processing projects and an industry clean-up, according to Xinhua, which cites a report.

“All locals should not irregularly build fuel ethanol projects in the name of processing corn or blindly expand corn processing capacities,” it says.

Blind expansion of the industry may threaten the country's food security, the report says.

The commission says local firms have applied to build fuel ethanol facilities with annual capacity already exceeding 10 million metric tons.

The commission will encourage plants to use non-grain raw materials as feedstocks and it will designate plants to produce fuel ethanol for blending into gasoline.

Any irregular expansion or unauthorized production or sales would not be covered by Beijing's financial aid, it says on its Web site.

Editor’s note: Richard Brock, The Corn And Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com