Domestic Fuel

The U.S. Grains Council is setting up demonstration trials in targeted countries to educate livestock producers about the nutritional and economic benefits of using ethanol co-products like corn gluten feed (CGF) and distillers dried grains with solubles (DDGS)

“Conducting the trials locally gives local farmers a chance to see DDGS and CGF use firsthand in a trial that utilizes their own climatic conditions. It provides them a reliable source of data they can be more confident in,” said Lori Feltis, USGC Rest of the World Advisory Team member, who is currently in Egypt to assess the use of U.S. DDGS and CGF.

In April, the Council initiated a demo-trial in Egypt where local animal production operations formulated DDGS and CGF inclusion ratios in their feed rations. This week, USGC consultants, staff and Feltis traveled to Egypt to analyze the ongoing progress of the trials.

With persistent rain affecting ethanol and sugar production in Brazil this season, prospects are that U.S. ethanol may be exported to that country to meet the demand.

According to the Brazilian Sugarcane Industry Association UNICA, ethanol production this year is down more than three percent so far while demand continues to grow. “While production has been negatively affected by weather conditions, reducing the availability of products offered in the market, demand has been growing steadily,” UNICA reports. “Ethanol (anhydrous and hydrated) sales to the domestic market in the month of September reached 2.05 billion liters, 14.9% more than in the same month last year.”

As for the export market, total shipments from April to September reached 2.1 billion liters, down 12.52% from the 2.41 billion liters recorded in the same period last year. The most significant reduction in exports involves anhydrous ethanol – the type that is blended with gasoline – with total shipments down 58.03% for the year, although there was a 42.46% increase in hydrated ethanol exports over the same period.

Reuters this week reported on the buzz about ethanol exports to Brazil, with the weak dollar making prices more competitive. All gasoline sold in Brazil contains 25 percent ethanol. Last year Brazil exported 1.365 billion gallons of ethanol, with 740 million of that coming to the U.S.

The world’s largest rally competition will include an ethanol category for the first time next year.

The new category was introduced by the Dakar Rally organizers at the request of Brazilian rally veteran and former rally winner Klever Kolberg, who will drive the first-ever flex-fuel vehicle to take part in the prestigious race next year – a Brazilian-made 2010 Mitsubishi Pajero Sport model equipped with flex-fuel technology, with support from the Brazilian Sugarcane Industry Association (UNICA).

There is special meaning in supporting Kolberg’s effort according to UNICA President, Marcos Jank. “Ethanol is already utilized by the Indy Racing League, which is one of the most important racing categories in the world, and it is being adopted by a variety of categories here in Brazil and around the world. It is certainly significant to see that trend now arriving also at the Dakar, without a doubt one of the great events of its kind in the globe,” he said.

The 2010 Dakar Rally will be held in Argentina and Chile, with the start set for January 1st in Buenos Aires. The Dakar Rally was formerly known as Paris-Dakar.

In what should be a cautionary tale to American lawmakers who might want to raise revenues from biodiesel sales, a leader of Germany’s biofuels industry says high taxes on biodiesel in that country are killing the green fuel there.

This article from Forexyard.com quotes Peter Schrum, president of biofuels industry association BBK, saying that Germany’s nearly 5 million tonnes annual biodiesel capacity is only at about 20 percent of that level:

“The industry is still in a disastrous state largely because of increased taxes,” Schrum said. “Sales are dead.”

“The B100 (petrol station) market hardly exists for biodiesel,” he said.

The German biofuels industry is now looking to the Sept. 27th German parliamentary elections as a chance to change lawmakers to those who might reconsider the high-taxing actions.

This is one of the good news, bad news stories.

The bad news is: According to this story in World Energy Alternatives, Brazil wants to start sending soy-based biodiesel to the U.S. and the European Union. That word comes the Brazilian Agriculture Ministry:

Sustainability studies have been performed to prove the biodiesel was produced sustainably to meet EU norms, but some areas have to be adapted to meet requirements in order to enter the market.

While the news that foreign biodiesel could be headed for America’s shores and into an overseas market that the Americans would like to get back into (Europe) might be bad for most biodiesel producers in this country, at least one is looking to take advantage of the boon in Brazilian biodiesel production by investing in that growth.

This story from the San Francisco Business Times says California-based Amyris Biotechnologies, a company that has already raised more than $24 million for a sugar cane-to-biodiesel plant, wants to raise a total of $62 million:

In a filing with the Securities and Exchange Commission, Emeryville-based Amyris said it is already nearly halfway there, with $24.75 million in commitments. Amyris had previously raised $120 million in two rounds of venture financing, much of it from top-tier venture capitalists and other investors like Khosla Ventures, Kleiner Perkins Caufield & Byers and TPG Biotech.

Amyris is gearing up to begin commercial production next year in Brazil. In a joint venture with Brazil’s second-largest sugar cane grower, it aims to produce 200 million gallons a year by 2011.

Ethanol groups expressed concern and Senator Chuck Grassley (R-IA) called for clarification this week on the White House’s position regarding the U.S. tariff on imported ethanol after a statement in favor of lifting the tariff was made by the President’s nominee for ambassador to Brazil.

During his confirmation process, ambassador nominee Thomas Shannon said that removing the tariff would be “beneficial,” however as the official voice of the United States in Brazil, Shannon also stated that he will support the position of the Obama Administration.

“As a senator and as a presidential candidate, President Obama supported keeping the U.S. tariff on imported ethanol,” Grassley said. “It’s important to know whether the Administration’s position has changed before this nomination goes forward.”

In response, the White House issued a statement yesterday regarding the administration’s position on the ethanol tariff:

“The Obama Administration is committed to developing our domestic biofuels industry, and to help the international market for biofuels grow. Biofuels are an important renewable energy resource, which will help diversify our energy matrix and reduce our dependence on imported oil. Regarding the U.S. tariff on Brazilian ethanol, the administration has no plans to change it.”

Both the Renewable Fuels Association and Growth Energy expressed concern and confusion over Shannon’s statements. “During his tenure in the U.S. Senate and as a presidential candidate, President Obama has been a strong supporter of America’s evolving ethanol industry,” said RFA President Bob Dinneen. “Removing the tariff would have a chilling impact on the development of next generation technologies and unfairly require Americans to subsidize foreign industry.”

Growth Energy CEO Tom Buis was pleased to see the quick response from the White House. “We applaud the Obama administration for reinforcing its commitment to homegrown ethanol,” Buis said in a statement. “Keeping the tariff on Brazilian ethanol will ensure the development of a domestic renewable fuel industry, which creates green collar jobs, reduces our dependence on foreign oil, strengthens our national security, and improves the environment.”

Brazilian government officials say the country will buy, operate and maintain up to five hydrogen-cell-fueled buses, as well as putting in a station to produce hydrogen to supply the buses.

The project is part of country’s Ministry of Mines and Energy (MME) partnership with the Urban Transportation Metropolitan Enterprise in Sao Paulo to develop cleaner urban public transportation in Brazil. Money for the program comes from the Global Environmental Facility (GEF) and the Studies and Projects Funding Body (FINEP), with support of the United Nations Program for Development (UNPD).

For MME Minister Edison Lobão, the project is a further step for the government to consolidate the country’s expertise in the use of renewable sources. “This project results from a huge effort of the Ministry of Mines and Energy with its partners. With the hydrogen-fueled bus we are further developing the Brazilian economy,” he said.

MME’s Secretary for Petroleum, Natural Gas and Renewable Fuels, José Lima, said this is a pioneering project in Latin America aimed at disseminating the technology. “The Brazilian success with ethanol and biodiesel allows us to use hydrogen from renewable energy sources. From now on, our challenge will be to structure the hydrogen economy in Brazil,” he said.

The technology being used is a combination of hydrogen cells and batteries, that allows for increased fuel saving and rational energy use by storing the energy generated by the cell during the periods when the vehicle is idle, such as passenger boarding or stops at traffic lights.

Just as the European Union was extending for five years the temporary duties the EU has slapped on American biodiesel, you would think would be the time the U.S. Trade Representative would want to talk about the protectionist tariffs with his European counterpart. Nope. Ambassador Ron Kirk had bigger fish to fry when he met with European Union Trade Commissioner Catherine Ashton in Washington this week. Like a dispute over playing Irish music in American commercial establishments. I kind you not. While what could be a lifesaver for the U.S. economy and the world’s environment is being shut out of one of the biggest markets on earth, Kirk wanted to beat his sheleighly over whether Danny Boy should be sung in pubs (I’m not sure if that’s EXACTLY what the musical dispute is all about, but you get the idea).

To be fair, as noted in this Examiner.com story, there were several other important trade issues that were discussed at the meeting this week. But, c’mon. There wasn’t enough time to fit the biodiesel issue into the agenda? Between this and EPA official Margo Oge thinking that it takes 64 acres of soybeans… no, make that 400 acres of soybeans… to make a gallon of biodiesel (she’s a little off on her math. It’s actually 64 gallons of biodiesel out of each acre of beans.), you gotta start to wonder if anyone in Washington, D.C. is really looking out for U.S. biodiesel producers.

Meanwhile, Reuters reports that biodiesel production in Europe jumped by more an 35 percent in 2008 and is expected to grow even more this year, despite the fact that half the plants on the continent are not operating because of poor demand. The tariffs keeping the American biodiesel out of Europe are seen as major factors for the projected growth.

The fight between the Europeans and Americans over U.S. biodiesel continues as the European Commission now proposes to impose anti-dumping duties on the yankees’ green fuel.

Hoosier Ag Today reports that the 27-country bloc recommended the punitive final duties at a meeting in Brussels today:

The Commission suspects U.S. biodiesel is heavily subsidized. The duties will come into force by July 12 and range from 23 Euros to 41 Euros per 100 kilogrammes or about 160 pounds. The duties would last for up to five years.

The stakes are high as biodiesel represents around 80 percent of the total production in Europe of biofuels, which have become an important pillar of the EU’s efforts to fight global warming. While both the United States and the EU support the use of biofuels, the group claims that US biodiesel is being sold at below US producers’ costs thanks to generous subsidies.

National Biodiesel Board Vice President of Federal Affairs Manning Feraci was quick to respond, calling the decision “unfortunate:”

‘Throughout this case, we have constantly put data on the record that clearly shows the European biodiesel industry was not being harmed by U.S. competition. In fact, some EU companies have fared quite well. For those that have not, it is factors unrelated to U.S. competition – bad business models; high feedstock costs; and detrimental EU member state policy- that are to blame. The decision to ignore these fundamental facts has yielded a protectionist result that is detrimental to all parties involved.

“Moving forward, the U.S. biodiesel industry will certainly reserve our right and ability to further address this flawed outcome.”

Oxfam International released an interesting report yesterday called, “Suffering the Science: Climate Change, People and Poverty”. The crutch of the report is to demonstrate how the effects of climate change are impacting people in poor communities much harder then in developed regions. Issues that are linked to poverty and development include access to food and water as well as health and security. The report warns, “without immediate action 50 years of development gains in poor countries will be permanently lost.”

The study was released in tandem with the G8 Summit being held in Italy beginning tomorrow. Climate change and poverty issues are expected to be high on the list for discussion.

“Climate change is the central poverty issue of our times,” said Jeremy Hobbs, Oxfam International Executive Director. “Climate change is happening today and the world’s poorest people, who already face a daily struggle to survive, are being hit hardest. The evidence is right in front of our eyes. The human cost of climate change is as real as any redundancy or repossession notice.”

Another issue the report focuses on is the impact of erratic weather on agriculture. Without the ability for poor farmers to rely on seasons, they are losing multiple crops due to sudden heat waves or heavy rains. The report also accusess “rich countries” of creating the climate crisis. Oxfam wants these countries to fund more aid programs as well as adopt tougher climate policies. It will be interesting to see what “calls to action” come from the G8 Summit relating to climate change and poverty.