Hungary's bioethanol projects hit by high grain price

BUDAPEST, Oct 25 (Reuters) - Plans to open dozens of new bioethanol plants in Hungary using millions of tonnes of grain have stalled because of high agricultural prices, a firm which earlier announced one of the biggest projects said on Thursday.

Swedish firm SEKAB said last year it would open four bioethanol plants for a total of 380 million euros ($540.5 million), using an annual 1.5 million tonnes of Hungary’s surplus grain.

“It’s not getting anywhere,” Laszlo Zsemberi, who heads SEKAB’s Hungarian operations, told Reuters.

Since last year grain prices have doubled in Hungary due to a global market rally and a severe local drought, which has ruined more than half the maize crop.

Zsemberi said other firms faced similar problems.

“I can certainly say that the current ethanol market and the agricultural raw material situation have made ethanol projects impossible to finance for banks and investors,” said Zsemberi, who leads the Hungarian Bioethanol Association.

It is one of several ethanol groups and includes the local unit of U.S. biotech giant Monsanto MON.N as a member.

Hungary, which in recent seasons struggled to get rid of its grain stocks, has targeted 800,000 tonnes ethanol capacity within a few years, but it is now running out of grain, prompting protests from livestock farmers short of feed.

Zsemberi said the ethanol capacity target would not be met without strong incentives from the government and the European Union.

“According to our calculations ethanol cannot be economically produced with a maize price over 150 euros per tonne,” he said.

Grain prices have surged well over 200 euros in Hungary.

Two firms already produce bioethanol in the eastern European country, Gyor Distillery and Hungrana, which is jointly owned by Austria's Agrana AGRV.VI and U.K. sugar maker Tate & Lyle TATE.L. Both have announced plans to expand.

SEKAB and other supporters say biofuels help reduce emissions of greenhouse gases contributing to climate change, but critics say industrial farming methods do not allow any emission savings.