(From THE WALL STREET JOURNAL)

By Laksme Khorana and Prasenjit Bhattacharya

Asia’s efforts to adopt biofuels are faltering as a surge in food prices forces governments to scramble for crops other than corn and palm oil with which to make the fuels.

Unlikely plants such as cassava and sweet sorghum are emerging alongside the better-known jatropha as alternatives, illustrating the pressure on fast-growing emerging economies to cut crude-oil consumption and pollutants while keeping food prices low.

If successful, the shift to marginal, low-maintenance crops as feedstock could yield the policy push that is necessary for the growth of the Asian biofuels industry, experts say. Crop switch also could benefit the region’s land-rich, populous countries by unlocking the value of less-fertile areas where plants such as jatropha, a hardy shrub whose seeds are pressed to yield biodiesel, and cassava are easily grown.

Aware of the potential to create jobs and lift incomes in poor regions,
governments are pushing ahead with investment in refineries and with other initiatives, such as loans to farmers.

Biofuels, which include ethanol and biodiesel, can be made from many plants, but readily available food crops such as corn, rapeseed and oil palm have become the first option in many countries, fueling demand for these and a bruising round of food inflation that has pushed up the cost of many staples.

The price of corn has nearly doubled from 2005 levels, while that of palm oil has risen 70% since the start of last year.

China, like the U.S., makes much of its ethanol from corn. It is the world’s third-largest producer by capacity, trailing the U.S. and Brazil. This year, Beijing banned new corn-based ethanol refineries, worried that the extensive use of corn would push grain prices even higher and necessitate imports.

China also has scaled down its annual ethanol-output target to two million tons by 2010 from five million tons.

Its first cassava-based ethanol factory is expected to start operation in December. Set up by state-run China National Cereals, Oils & Foodstuffs Corp. at a cost of 750 million yuan (about US$100 million), the factory is based in the cassava-rich Guangxi region and has an annual capacity of 200,000 metric tons.

“The Chinese government is looking at alternative crops such as wheat
sorghum and cassava for producing biofuels,” said Jikun Huang, director of the Center for Chinese Agricultural Policy and an adviser to the Chinese government. “This is a good solution, as farmers can make profits from growing these crops, while food supply is not compromised.”

Thailand makes most of its ethanol from sugar cane and molasses, but
cassava, which is plentiful, is gaining in popularity because it can be grown year-round and is easy to harvest. “This is the plant of the future,” said Sriroth Klanarong, director of the Cassava and Starch Technology Research Unit at the National Center for Genetic Engineering and Biotechnology.

The Thai government has approved 45 ethanol plants with potential production capacity of around 10.9 million liters a day, and more than half are cassava-based, accounting for around 70% to 80% of the total capacity, according to the U.S. Agriculture Department.

Although debate continues about the extent to which crop-based fuels cut carbon emissions, their use, especially as additives to motor fuels, has caught on in the U.S. and Europe with the help of government mandates and subsidies.

In 2002, China mandated 10% ethanol blending in nine of its 22 provinces. It hasn’t extend the requirement to more areas. Malaysia, where palm oil is used as feedstock for biodiesel, has a 5% blending mandate but has said it will delay implementation until palm-oil prices fall below 2,000 ringgit (about $590), roughly 25% below the current level.

Many say Asian demand for biofuels will pick up if food inflation is controlled, giving governments more room to strengthen mandatory-blending
policies and ensure they are implemented.

Skeptics point out that cassava and jatropha are far less established than corn, palm oil and sugar cane as feedstock. As large-scale cultivation is just beginning, there could be risks associated with the quantity and quality of yields, some say.