China checks land for biofuel on food worries

By Niu Shuping

BEIJING, Dec 13 (Reuters) - Beijing has launched an investigation into how much land it can afford to use for biofuel crops amid worries over food supply fuelled by surges in international grains prices.

China, already the world's third largest ethanol producer, has already stopped building new biofuel plants, which would use food crops such as corn or wheat, in the past year.

The move reflects an increasing worry by the government, which has promoted growing of power crops, such as cassava, on marginal or on saline or alkaline land as years of urbanisation reduce the country's arable land.

"We will moderately develop power crops by using marginal land and uncultivated mountains," Zhang Fengtong, a director at the agricultural ministry told a press conference. "We are investigating how much land are there and development of power crops have to follow China's own situation."

China, with per-capital land at one third of the world average, has to secure that power crops would not take land away from grains, said Zhang.

Zhang did not say when the investigation would be completed, but industry officials said the country would face raw material shortages in its first non-grain ethanol plant, due to come on stream this month.

The 200,000-tonnes-per-year ethanol plant in south region of Guangxi, built by China Agri-Industries Holdings Ltd (0606.HK), a listed arm of state-owned agricultural group COFCO, will have to import from neighbouring Vietnam and Thailand.

"Cassavas are used in starch-making in Guangxi, and if used for ethanol, there will be a shortage in the area," said Wang Zhongying, a researcher with the Energy Research Institute of the National Development and Reform Commission.

"Nobody knows how much marginal land China has. Farmers have already grown on every piece of land they can cultivate even on mountains," Wang told a energy conference last week.

Raw materials have become crucial for China's future ethanol plants, particularly as the second-generation of technology to convert agricultural wastes into ethanol would not be commercial viable in four years.

COFCO was also studying using sweet sorghum for ethanol production, said Lin Hailong, a manager at the biochemical and bioenergy department.

"Cassava is the only choice right now ... but we have to import," Lin told Reuters last week on the sidelines of the conference.