Inflation fears smother China’s ethanol drive

BEIJING/HONG KONG (Reuters) – Beijing is putting the brakes to China’s ethanol production drive after increases in corn prices worldwide rekindled worries over inflation and food security.

A shortage of raw materials — because of dwindling arable land, difficulties in importing and a rush enmasse by state firms into the once Beijing-sanctioned arena — is pushing up grain prices and could throw a spanner in the works of one of the world’s largest ethanol production campaigns.


A recent climb in pork prices — blamed partly on swelling corn feed costs — served as a wake-up call to Beijing, which had promoted biofuels as a means to wean the country off imported oil and secure income for hundreds of millions of farmers.

Now, industry officials and traders say the National Development and Reform Commission (NDRC), the country’s top economic planning body, was revising downwards China’s 2010 target for fuel ethanol output to 2 million tonnes from 5 million tonnes.

Reuters