June 12, 2007 (LPAC) -- The Beijing Youth Daily reported yesterday that the "rapid development of grain-based ethanol biofuels has resulted in commodity price pressures in non-developed nations." While China has put forward a "National Climate Change Program" earlier this month, the country must use its grain to feed 1.3 billion people and arable land should be reserved for food, not energy production, the Youth Daily wrote.

Basic food prices are shooting up in China. Corn (maize) is a staple grain in northeast China, and also used to feed pigs and chickens. Already in May, prices for pork were up a full 43% over a year ago, with egg prices up 30% year-on-year. Rising food costs are the basis of overall inflation rising well above 3%, and earlier this month, Peoples Bank of China governor Zhou Xiaochun said they would be "paying close attention to the recent rises in pork and egg prices, which weigh heavily on China's inflation," in considering interest rate rises and other measures. The population spends about a third of its income on food, so price rises have a big impact. During the current Five Year Plan (2006-10) China will stop exporting corn and begin to import some 350,000 tons a year.

The State Council (national cabinet) has recently decided to not approve any new grain-based ethanol projects. Ethanol production can continue, but only non-grain sources, such as grass, corn stalks, sorghum, and such plant material will be used, an official of the National Development and Reform Commission said at a Beijing seminar on biofuel development yesterday. "Food-based ethanol fuel will not be the direction for China," said Xu Dingming, vice director of the Office of the National Energy Leading Group, according to Agence France Presse.

There are already four enterprises, in Jilin, Heilongjiang, Henan and Anhui, which can produce 1.02 million tons of corn-based ethanol a year, but they will slowly shift to non-food sources. The NDRC says that China follows the United States, Brazil and the European Union in producing and consuming ethanol.