China recently bought an additional 21 million bushel of corn, per the WSJ more than what their traditional annual purchase is. That prompted a story in the WSJ of corn shortage fear mongering for the US, suggesting increasing meat demand in China as well as a need to supply such corn. Here is what is missing:

China has a current capacity of producing ethanol in 5 large-scale (120 mgy) plants for a total of 600+ Million Gallons per year. Feedstock is cassava or corn. CORN! To feed those on corn only, takes 222 million bushel corn per year. The one time order of 21 million bushel cited is merely 60% of one plants annual intake, or a mere ten percent of what those plants digest annually. In addition, the COFCO in China announced plans to ramp up production of ethanol in to the equivalent of 25% US production or 50 large-scale plants by 2020, meaning ten times capacity in less than ten years or an annual increase by 222 bushel of corn (if all would be feed corn).

Conversely (or perversely) China exports ethanol via the Caribbean (for dehydration) to the US as fuel ethanol (do a Google on that).

If you take this together, China is buying US corn, produces Ethanol, and sells it back to the US while keeping the DDGS, the feed byproduct which replaces corn in hog and cattle rations locally. This business makes even more sense for China as they can build cheaper plants, run them better energetically integrated and profit from increasing ethanol prices in the US. What you have in sum is an outsourcing of the corn to ethanol production to China, which also makes sense, because all the empty containers that delivered the iPhones, computers, iPads and TVs to the ports in Long Beach and Oakland can be filled with comparatively cheaper corn to go back and get more goods to further increase the US trade deficit (which  BTW will also be worsened by importing higher value ethanol from China).

Here is now, where you actually do have an iLUC issue: China uses US soil to grow corn for ethanol, which now does not end up anymore in food/feed in China. This is different from the US situation, because in China you do need more calories per person, whereas in the US we have too much (to be precise we consume 4,000 cal/day/capita in the US, or twice as much as we should per USDA).

What should happen is, that China should shut down their own ethanol facilities if they do not have enough domestically grown feedstock to run them. Further, China should not be allowed to purchase corn as long as they produce ethanol from corn they do not grow or have. Obviously one now runs into WTO and free trade issues, but on the upside the perversion in the rhetoric around corn-to-ethanol and iLUC is now blatantly obvious with the new twist, that the exploiting (highly industrialized) country is China and the exploited farmers are American, while the American ethanol industry, beat up and bashed looses out, and we again become dependent on foreign imports.

What irony, and how fast did we get here?

This entry was posted on Wednesday, August 17th, 2011 at 10:28 and is filed under Biorefinery, Public Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.