China's corn processors bet on biofuels

Despite government curbs, China’s corn processes continue to bet on biofuels production. Worries of grain supply shortages prompted the government to halt approval of new projects that process corn into ethanol. However huge profits have lured investors and local governments to continue preparing new projects, with a planned annual output of more than 10 million tons of fuel ethanol, almost ten times the current output. Oil price hikes and government subsidies boosted fuel ethanol production from 30,000 tons in 2002 to 1.02 million tons in 2005. Corn prices in China, the world’s second-biggest corn producer, rose to a record as domestic demand looked set to swallow the country’s largest-ever harvest and reduce exports. China sold corn for export at US$160 a ton in September 2006. By December, the grain was selling for more than US$190 a ton on the domestic market. (January 3, 2007)