Undercurrents: beneath the obvious

December 23, 2006

Biofuels eat into China’s food stocks

Filed under: Ethanol — nemo @ 3:23 pm

The Asia Times Online reports on China’s growing ethanol production and rising grain prices:

China’s biofuel industry is booming thanks to voracious demand for energy to power the country’s high-flying economy.

Government officials estimate that corn contributes about three-fourths of the raw material used for making ethanol in China.

Industrial processing in China consumed 23 million tonnes of corn in 2005, an annual increase of 16.5% from 2001, while corn production increased at the slower rate of 5% during the same period, according to a circular released this week by the National Development and Reform Commission (NDRC), China’s top economic body.

Yet surging demand for biofuel is now partly blamed for recent price hikes in the food market and for shortages in grain stocks. Wheat prices are at their highest level in a decade, due to poor harvests in key producing countries such as the United States and Australia, while corn prices have surged by up to 20% in local markets.

Experts warn that if ethanol production continues to be corn-based, China will be forced to import the crop by 2008. Relying on crop imports is a sensitive issue as the government policy supports food self-sufficiency for the sake of national security.

The rate of corn usage in China is roughly 3 times the increase in corn production and China risks being unable to feed its people in two years. Is China’s experience a forecast of a similar outcome in the U.S.?

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