Biofuels Digest, BIO Invite Responses to the Q2 2011 Bioenergy Business Outlook Survey

Biofuels Digest, the world’s most widely read biofuels daily, and BIO are inviting responses to the quarterly Bioenergy Business Outlook Survey, today through Friday June 17.
The 21-question survey examines growth expectations and opportunities from a company, national and organizational point of view and is open to companies and organizations in all sectors of the industry.
The Spring 2011 Survey found that nearly 40 percent of the industry expected strong to moderate growth, anywhere from 5 to 20 percent, with rising demand for alternative fuels, new technology or intellectual property, and partnering in R&D, production and marketing driving growth.
The Summer 2011 Survey will indicate whether those expectations are still as strong.

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Energy Matters

Some say growth in the biofuel industry can play a significant role in fueling this country’s economic engine. For example, there are about three-dozen cellulosic biorefineries currently in various stages of planning or construction. Six of these are already in operation producing biofuels.

Industry analyst Bio Economic Research Associates projects that advanced biofuel producers such as these can create more than one-hundred thousand new jobs by 2022. Many of these jobs will be in sectors hit hard by the current recession, such as agriculture and construction. Plus, analysts project that the growth of the industry could directly contribute over thirty-five billion dollars annaully to U.S. economic growth by 2022.

Another benefit, many believe, is that advances in biofuels can reduce annual oil imports by as much as $70 billion each year, also by 2022. This could save billions of dollars in oil imports over the next decade.

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High Food Prices Hurt Consumers and Biofuels Companies

Yesterday, the New York Times wrote:

“A United Nations food agency called on Tuesday for a review of biofuel subsidies and policies, noting that they had contributed significantly to rising food prices and the hunger in poor countries.

With policies and subsidies to encourage biofuel production in place in much of the developed world, farmers often find it more profitable to plants crops for fuel than for food, a shift that has helped lead to global food shortages.”

Even though corn and other crop prices increased from 2006 to 2007, there is no shortage of food. According to the USDA National Agricultural Statistics Service U.S. farmers planted 92.9 million acres of corn in 2007 (NASS: Acreage), with average yield expected to be 153 bushels per acre (NASS: Crop Production). USDA says 3.4 billion bushels, roughly 26 percent of the expected harvest, will be converted to approximately 9.3 billion gallons of ethanol, leaving more than 9 billion bushels for food, feed and export markets, which would easily meet or exceed 2006 demand from these markets.  Translation, plenty of food.

Food prices increased 4.1 percent in the United States from June 2006 to June 2007 for a number of reasons:  increased corn prices, increased costs of oil, worldwide weather-related disruptions of food (droughts and freezes), and contamination scares.

Now fast-forward to October, 2008.  Barron’s wrote on October 2, 2008,

“Corn prices, for example, fell 6% in Thursday’s trading, dropping to $4.55 a bushel – the lowest price corn has commanded since December. “

High food prices aren’t just bad for consumers, they’re bad for the biofuels industry.

“There were ominous signs for the [biofuels] industry even before the Wall Street meltdown,” writes the Associated Press.

“By 2007, corn and soybean prices charged upward, cutting into the profit margin for biofuels and leaving some plants without enough cash to operate.

Plant operators in Lilbourn said doubling soybean prices wiped out cash reserves just as the first batch of biofuel was produced.”

But now,

“…with commodity prices dropping, construction for some stalled biofuels plants has restarted.”

The take-home message, high food prices result from a complicated set of factors and affect not only consumers but the biofuels industry as well.