Dim Sums: Agricultural Markets in China

China's chemistry-loving leaders built a biofuel industry 25 years ago to dispose of surplus grain generated by policy mistakes. Chief Chemical Engineer Xi Jinping is now in charge, but he's obsessed with food security and EVs. China's biofuel industry is under threat from another chemistry breakthrough based on China's favorite raw material: coal. An article on a Chinese chemical industry site last year saw little hope for China's biofuel industry, describing it as plagued by oversupply, in a constant state of structural adjustment, and facing a continuous barrage of threats, including soaring raw material costs and a shrinking petroleum market. The latest threat is the emergence of a cheaper coal-based ethanol undermining China's plant-based fuel ethanol industry.  China first launched a plan to produce fuel ethanol in 2001, and within a few years several facilities had been constructed in grain-producing provinces to distill a massive stockpile of old corn ...

Chinese authorities have set ambitious goals for biofuel use that call for nationwide use of fuel ethanol in automotive gasoline by 2020, scaling up of cellulosic ethanol production by 2025, and attaining a world-leading position in biofuels. The plan entails quintupling ethanol production in three years, and implies that China's history of non-grain biofuel flops will be reversed. The " Implementation program for promotion of biofuels and expansion of bio-ethanol as automotive fuel " jointly issued by 15 Chinese ministries and commissions, led by the National Development and Reform Commission and the Energy Bureau on September 13, 2017 was described as having "great practical and strategic significance." By 2020, automotive use of bio-ethanol fuel will be expanded nationwide from the handful of pilot provinces currently using it. The document also urges development of cellulosic ethanol and advanced biofuels to achieve a world-leading position in biofuels by ...

The Chinese government has hoovered up corn at a record pace again this year to keep prices artificially high. Having already spent billions to buy up and store the corn, the government is preparing more subsidies to sell it off. As of February 10, 2016, officials had purchased 82.6 million metric tons (mmt) of this year's corn crop for the "temporary reserve." That's 37 percent of the entire corn crop and roughly matches last year's government purchases. The purchases will continue through next month, so the total could surpass 90 mmt . At a price of 2000 yuan per ton, that would be a 180-billion yuan (nearly $28 billion) corn shopping spree since last November. Some analysts in China estimate the corn stockpile has grown to nearly a year's supply, and officials are now making preparations to offload the  reserves. China's grain bureau has reportedly drawn up a preliminary list of processing enterprises it intends to target for special sales of corn...

A Chinese rice expert suggested planting new "super rice" to suck heavy metals out of polluted soil. He recommended that the toxic rice be used to produce fuel ethanol. The recommendation was made at a fuel ethanol conference held in Guangdong Province. An aid to China's octogenarian superstar rice-breeding Yuan Longping gave the speech--Yuan was unable to be present due to "an important meeting." The "super rice" varieties tend to absorb large amounts of heavy metals from the soil. Yuan's aid suggested that planting these super rice varieties could be a cost-saving measure to rehabilitate the soil by sucking cadmium and other toxins out of polluted soil. It is estimated that one-fifth of China's cultivated land--including 25 districts of 11 provinces--and 12 million metric tons of grain produced in China are contaminated with heavy metals. Since the rice would be toxic, it was recommended that biofuel companies make it into fuel ethanol,...

Beware the "win-win" campaign that promises to make money for companies while eliminating poverty. China's State Council is preparing a big plan to plant oilseed-bearing trees on sloped land, salinized land, and wetlands they plan to remove from grain production. The plan calls for planting oil-bearing trees like tea oil, walnuts, a type of almond, oil peony, maple and sumac on 200 million mu (about 33 million acres) of land by 2020, with a planned output of 5 million metric tons of edible oils. This will utilize land not suitable for grain production and reduce imports of edible oils, says the draft document. In a common pattern, China is again basically rehashing similar plans formulated in the last decade. In the mid-2000s, a cabal of Chinese authorities, multinational companies and State-owned Chinese companies formulated big plans to produce biofuels by growing starch, sugar or oil-bearing crops to be used as raw material. The most prominent were sweet sorghum, ...

China's "Renewable Energy Plan" for the 12th five-year plan period aims to increase ethanol production by 1.2 million metric tons (mmt) to reach 3 mmt by 2015. The propaganda coming out now indicates a push to meet that goal by stepping up non-grain ethanol production. An article from the "industry research net" posted on several websites several days ago pronounces that it's already clear that China must "take the nongrain ethanol road." The article cited remarks by Premier Wen Jiabao at last month's China-Southeast Asia exposition which attributed recent rises in corn and wheat prices to international market influences but nevertheless called for control of corn-based processing. That presumably includes ethanol. The article then cites a foreign scientist who extols the advantages of non-grain biofuels and lists vague "breakthroughs" made recently in the four grain-based ethanol plants authorized in 2004. The Jilin Ethanol Co. has ...

Sweet sorghum is another crop being touted as a costless source of biofuel, but the road is not so smooth. Sweet sorghum looks like a giant corn stalk about 10 feet high. The stalk contains sugar that can be squeezed out and distilled into alcohol. Sweet sorghum is seen as an attractive alternative because it can grow on poor land that’s unsuitable for other crops. Nongrain biofuel projects are the “in” thing and they’re being pushed by the government and everyone wants a piece of the action. Especially since there are generous government subsidies available. Mr. Liu, an official of the local Agricultural Bureau’s seed company in Huanghua ( Hebei Province ), complained to a China Times journalist that COFCO had left the farmers at the altar. In March 2007 COFCO and its partner, BP petroleum, made plans for pilot projects in Hebei, Shandong, and Inner Mongolia, giving local officials and farmers some sort of promise that they would buy the sorghum to make biofuel on a trial basis. ( CO...

The biofuels industry is on a quixotic quest for a free lunch--to find raw materials that don't cost anything--switchgrass, jatropha, used vegetable oil, wind, etc. Most of these are years or decades away from practical use. But let’s consider cassava, also known as tapioca, a “nongrain” feedstock that has already been brought into production. In December 2007 China opened its first biofuel factory that uses a nongrain feedstock—cassava, also known as tapioca. Cassava is basically a weed that will grow anywhere. You just stick a piece of it in the ground and come back 8 months later to pull up its starchy root. It grows mostly in Guangxi Province and other parts of Southeast Asia where there is lots of rain, sunshine, and marginal soils. The idea is that biofuel can be produced from cassava without diverting grain away from food or feed users—that is, basically a “free” good. (If you skipped the first chapter of your economics textbook, the basic fact of scarcity is that ...