03/04/2008 (Finance Asia) - Current high food prices are not the result of demand for biofuel, said Dato’ Yeo How, group executive director at IOI Corporation, addressing a Green Wave panel on the competing demands for agricultural land. Dato’ Yeo believes the higher prices are the result of consumption growth in the developing world and the disruption to crop yields caused by changing weather patterns. He also pointed out that already scarce farmland is being absorbed by urbanisation. “Capacity is not keeping pace with a consistent growth in consumption,” he said.
Members of the biofuel panel at the annual Credit Suisse Asian Investment Conference in Hong Kong focused on palm oil because it is a higher yielding crop than other biofuels. Palm oil yields four tonnes of oil per hectare compared with less than one tonne from other crops, said Dato’ Yeo, and it costs just US$200 per tonne to produce, while the others cost up to three times that amount.
About 15% of the world’s arable land is currently being used for the production of 17 crop oils, and less than 5% is planted with oil palm. Yet, palm oil makes up 35% of total production volumes, said M.C. Chandran, group special advisor at Platinum Energy. advertisement
Derrik Khoo, CEO at the Asiatic Centre for Genome Technology, said yields could be higher if genetically modified techniques were adopted. Khoo asserts that by engineering the palm oil genome, production could be boosted to 15 tonnes per hectare. The Asiatic Centre for Genome Technology is currently working on this technology in partnership with J. Craig Venter, a pioneer in genome sequencing. “Global warming is our biggest crisis,” Khoo said, and “we have to invent the future”. The Malaysian government is now helping his Jahore-based company to do just that.
Edgare Kerkwijk, a partner of BioX Group, pointed out that the European Union's decision to promote biofuels was made to provide its farmers with an alternative source of income as subsidies under the Common Agricultural Policy were withdrawn. It was never prompted by a desire to be “green”. “Biofuels are politically driven”, agreed Chandran.
Kerkwijk said “sustainability is key”, warning that many biofuels such as soy and palm biodiesel, and sugar and corn ethanol, emit more greenhouse gases if the emissions produced during the process of converting the land are included in the equation.
He said first generation biofuels are “transition fuels and will not be allowed in the medium-term future”. Chandran added that it might be 10 to 15 years before the technology is sufficiently advanced to make the second generation economically viable.
Chandran is a 40-year veteran of the agri-business and his enthusiasm for the future is undiminished. He warned, however, that supply cannot meet demand, and cited a troubling statistic: the affluent populations of the West spend 8% to 10% of their incomes on food, whereas in less developed parts of the world, the figure is 30% to 40%, so an increase in food prices would have a disproportionate impact on the developing world.
The balance of power is already clear: about 98% of palm oil is used in food products, most of it exported within Asia. Kerkwijk concluded that there simply is not enough vegetable oil to meet global demand for biofuels, but there is enough to meet the demand for food.