Blogging Ethanol & Biodiesel

"Nobody" understands diversion of food to fuel cars

Tensions on government biofuel policies came to a breaking point Tuesday at the opening of the United Nations food summit in Rome as the head of the UN's Food and Agriculture Organization (FAO) asserted that "nobody" understood the diversion of food to fuel cars.

          Environmentalists and academics have cited biofuels for its part in the 60% increase in food costs since the beginning of 2007 and ensuing food shortage riots in more than 30 countries. Diversion of land from food crops to biofuels has added to about a third of the rise, Washington D.C.-based International Food Policy Research has said.

"Nobody understands how $11 to $12 billion a year on subsidies and protective tariff policies had the effect on diverting 100 million tons of cereals from human consumption, mostly to satisfy a thirst to fuel for vehicles," said Jacques Diouf, FAO director-general.

The position of the United Nations is that biofuels such as ethanol and biodiesel can help decrease global warming and create jobs for the rural poor, but the benefits may be counteracted by serious environmental problems and higher food prices. However, Brazilian President Luiz Inacio Lula da Silva soundly rejected criticism that ethanol production in Latin America's biggest nation has cut food output, blaming higher oil prices and farm subsidies instead.

It seems to be the never ending debate: one side cites all the evidence for increasing food prices, while the other side continues to reject it.

Minnesota rolling in soybeans

Last week, Minnesota Gov. Tim Pawlenty signed into law a measure that increases the state's current 2% biodiesel mandate ten-fold in less than a decade. There could have been no increase in the mandate at all, but what, or who, caused the increase?

In December 2005, Minnesota officials had to temporarily roll back the requirement in response to complaints from truckers that the fuel was becoming viscous and clogging fuel filters.

The state currently requires diesel to contain 2% biodiesel, but the new rules under set a new mandate of 5% by May 1, 2009, 10% by 2012, and 20% by 2015. Those are some of the largest increases in the nation, putting Minnesota at the forefront of biodiesel mandating.

Minnesota farmers raise 280 million bushels of soybeans annually (about 10% of the total U.S. crop) on 7 million acres, a 165% yield increase per acre. Soybeans and soybean products now account for about one-third of Minnesota's total agricultural exports.

It takes Mother Nature 250 million years to renew her fossil fuels, but for Minnesota soybean producers it takes only nine months. Thus, Minnesota is in a better position than most to produce more biodiesel from soybeans.

President Bush to veto farm bill?

Criticizing Congress's "massive, bloated farm bill" that would support millionaire non-farmers, President Bush's comments from the Rose Garden Tuesday indicate that he will veto the package if changes aren't made.

Looking to offset the increased spending that would doom the bill, congressional negotiators on April 25 reduced the volumetric ethanol tax credit for a second time in the talks. Incentives for biodiesel and renewable diesel were removed entirely. Negotiations on the now-$280 billion bill are ongoing, with discussions focused on finding ways to compensate for the proposed $10 billion increase to the farm direct payments program.

A major breakthrough occurred late last week when senior lawmakers agreed on a $1.7 billion package of tax breaks, and ways to finance the overall package. The 51¢/gal tax credit for corn-based ethanol would drop to 45¢, which would save over $1 billion alone. But another $500 million would be netted out by a new $1.01/gal cellulosic tax credit, assuming of course, that any gets made.

Domestic fuel prices increase dramatically

A Department of Labor report will probably add fuel, so to speak, to the continuing discussion over the effect that biofuels growth has on food prices. The new data released April 16 showed that domestic food prices rose 5.1% in just the first three months of this year.

      Economists surveyed by Dow Jones Newswires were forecasting that the Labor Department's report would show the consumer price index increased at a rate of 4% annually through March 2008, compared to the 2.8% rise over all of 2007.

     The Labor Department's producer price index for finished goods, released April 15, showed a 1% increase on a seasonally adjusted basis – about twice what economists had expected. Food prices rose 1.2% in March, after falling 0.5% the previous month.

     Work by the Washington D.C.-based International Food Policy Research Institute suggests that biofuel production accounts for a quarter to a third of the recent increase in global commodity prices.

     With gasoline prices steadily rising, people are more anxious than ever to find an alternative. However, if it starts costing people at the grocery store, is there really a difference in the minds of consumers? Most people could find a way to cut back on driving, but eating might be another story.

Unfortunate turn of events for German automakers

Amid rising fuel prices and anxiety as to whether the higher blend level could be run in German car engines, the country's Environment Minister Sigmar Gabriel said Friday that plans to raise the ethanol level from 5% to 10% had been utterly cancelled.
        The government had previously warned the 10% blend level plan would be abandoned if more than one million vehicles could not run the fuel. He said that the government was now estimating that, in fact, the engines of 3.3 million vehicles would have been unable to tolerate E-10.
        In a dynamic familiar to that which has transpired in the U.S., German automakers, whose cars generally do not score well in efficiency, had been supportive of the E-10 strategy as a way to forestall legislation that might enforce better fuel economy.
        Industry association Verband der Automobilindustrie, anchored by BMW and Mercedes-Benz's had previously submitted what they thought was the correct figure for the number of cars on German roads not capable of running E-10, but somehow, at 360,000 their number was way, way off.
        Now, with the cancellation of E-10, the German car industry will "have to come up with other technical measures" to meet European Union emission targets of 120 grams per kilometer, Gabriel said, joking that auto parts makers would be pleased.

Continental's virgin biofuel flight

The airline industry hasn't always been the most forward looking in solving systemic efficiency problems, but a new effort appears to be taking hold. Following closely on the coat tails of Virgin's publicity stunt in January, Continental is now to perform virtually the same demo in 2009.
       What with the internecine bankruptcies, runway strandings, baggage handling x-games, and mollifying Naomi Campbell you would think there'd be little left in the budget for R&D. But right now, the average jet fuel price for 2008 is $118.8 a barrel, which will raise the 2008 fuel bill by more than $54 billion, according to the International Air Transport Association.
        The Continental flight will use a Boeing Next-Generation 737 equipped with CFM International CFM56-7B engines. CFM is a 50/50 joint company of General Electric Company and Snecma (SAFRAN Group).
        More details, including the flight plan, will be announced closer to the demonstration flight date.

Corn costs will head even higher this year

Margin squeeze ahead. U.S. farmers are expected to switch significantly more acres back from corn to soybeans to cut down on costs, the U.S. Department of Agriculture said this week.
            According to the latest Prospective Plantings Report, farmers intend to seed about 86 million acres of corn this year, down 8% from 2007, largely because the stuff takes so much fertilizer to produce.
           Some analysts are already nervous, including BB&T Capital Markets' Heather Jones, who said Monday that if indeed the USDA's call on corn acreage is right, either "demand must be rationed or there needs to be a big supply response from other growing regions of the world."
        Less informed observers are also weighing in.
        Biodiesel producer, take heart! In contrast, the USDA's forecast for U.S. soybean planting this year is way up at 74.8 million acres (versus 63.6 million acres that farmers planted in 2007.) That's because soybean prices have shot up in recent months, making the crop more profitable in relation to corn even though soybeans produce far less per acre.
        Soybean prices, according to ag economists, generally need to be at about 2.5 times higher than the price of corn to equalize the revenue between the commodities.

A rolling stone is gathering moss

PetroSun commenced operations yesterday at what is believed to be the first-ever commercial algae-to-biodiesel facility. The Rio Hondo, Texas plant won’t be making fuel immediately, but operations at the algae farm, comprising about 1,100 acres of saltwater pond, have begun.

        Scottsdale, Ariz.-based PetroSun said the facility will produce a minimum of 4.4 million gallons of algal oil and 110 million pounds of biomass on an annual basis. And, plans are in the works to expand the size of the algae farm at some point in the future.
        "Our business model has been focused on proving the commercial feasibility of the firm's algae-to-biofuels technology during the past eighteen months," said Gordon LeBlanc, Jr., CEO of PetroSun.
        "Whether we have arrived at this point in time by a superior technological approach, sheer luck or a redneck can-do attitude," LeBlanc said, "The fact remains that microalgae can outperform the current feedstocks utilized for conversion to biodiesel and ethanol, yet do not impact the consumable food markets or fresh water resources."

Jatropha is not biodiesel's magic bean

        Soy and palm oil prices being what they are, the most urgent question on the minds of most attendees at the National Biodiesel Board's annual convention in Orlando is alternative feedstocks.
        How does jatropha curcas measure up? In several conference sessions, the plant, which is now being cultivated for biodiesel purposes in parts of South Asia and Australia seemed to be a favorite target for debunking. A member of the Sustainable Biodiesel Alliance stood up to cast aspersions on jatropha at the pre-conference session on Saturday for being a "threat" to the environment because of the stubborn shrub's weed-like invasiveness.
        And yesterday, Rahul Kale from biodiesel consultancy kemOleo, said jatropha's poor yield simply wasn't worth the bother.
        "It costs roughly 10 times more to harvest jatropha than crude palm oil," Kale said.
        The National Biodiesel Board told Ethanol & Biodiesel News yesterday that it is putting together a proposal draft request for funding to the U.S. Department of Agriculture, seeking help in researching new feedstocks.
        "Soybeans got us to the dance," said NBB's Larry Schafer, "but we're going to need something else, whether it be jatropha, microalgae, or camolina to keep this business growing."
        Schafer said the proposal should be ready to be submitted later this year.

Biodiesel makes beef in Orlando

        Antagonism is rare at trade shows, but tensions flared briefly Monday at the National Biodiesel Board's conference here in Orlando when a representative of the EU's aggrieved biodiesel constituency spoke up at the policy session's Q&A with a particularly pointed question.
        "When will  U.S.taxpayers stop subsidizing its biodiesel production at the expense of Europe?" asked Doug Ward, the managing director of Scotland-based Argent Energy.
        The moderator of the session, NBB's VP of Government Affairs Manning Feraci, deflected the question by saying that he believed  U.S. sales to Europe were minimal. Also, the NBB's policy is against so-called "splash and dash" blending. Splash and dash is when biodiesel produced outside the U.S.takes on 0.1% U.S.-made biodiesel, qualifies for the $1/gal U.S. biodiesel blender tax credit, and sells the cargo elsewhere.
        Ward has a three-year-old company with a yearly production capacity of 50 million liters (13 million gallons) of tallow biodiesel. He told Ethanol & Biodiesel News that he thinks more than half of the biodiesel produced in the U.S.today is being off-loaded to Europe.
        Besides costing U.S. taxpayers on the order of about $300 million a year, Ward said that the practice flies in the face of the whole concept of securing a fuel supply. "Not only are [Americans] not using the biodiesel that's being produced," Ward said, "but they're paying for an artificial trade imbalance."