Will Rice Fuel the Next Ethanol Trend?

Sushi rice, sticky rice, rice wine vinegar, saki and ethanol. Ethanol? Yes, ethanol - the Japanese are experimenting with rice as fuel. A recent article in the Wall Street Journal explored the subject. But as is always the case, there's more to the story than the quick hit.

With all of the recent news about food shortages and rising food prices worldwide, the idea of growing rice for ethanol would seem ludicrous on the surface. Rice is even more of a main staple than corn for most of the world's population - much more - and just look at the political blame being laid on the threshold of corn ethanol. But in Japan, it's possible, just possible that it makes sense.

Rice Today

Did you eat rice today? If you live in Asia, the answer is almost assuredly "yes." Even in America, we consume 30 pounds of the grain per person, per year - a paltry amount compared with the 132 pounds per person, per year the Japanese eat. With a world production of roughly 431 million metric tons this year, rice is a large crop - the third-largest global grain after wheat (596 million metric tons) and corn, at roughly 775 million metric tons. As mentioned in an earlier piece on HAI, Dipping Into The Rice Bowl, rice accounts for one of every five calories consumed in the world. That's 20%.

And rice hasn't missed the grain boom.

Rice on the world market is still high, though it has backed substantially off the record prices it hit earlier this year. The combination of export restrictions in Vietnam ending and good harvest projections have helped prices recede. Harvests in big rice countries such as Thailand, Vietnam and India are expected to be good as we move into late summer and early fall. So good in fact, that Malaysia has decided to wait for prices to drop below $600 per metric ton before it finishes buying the rice it needs. (The current standard of Thai white rice is around $720 per metric ton.)

As we discussed back in May, here in the States, rice plantings are up by about 9,000 acres. But with stockpiles at all-time lows, even a record harvest doesn't alleviate the squeeze on rice stockpiles.

Elsewhere in the world, devastated Myanmar is still trying to get its crop planted and has run into some serious and unusual problems - the latest? Stressed buffalo. The government has transported all sorts of draft animals to the areas that have lost their working animals, but the animals are having a hard time adjusting. Normally it wouldn't be a problem to let the big guys settle in before getting them under the yoke, but time is running out for the farmers to get their crops in the fields if they are going to have any harvest at all.

Rice And Ethanol In The States

We are accustomed to hearing about corn or sugar cane being used to make ethanol, but a multitude of feedstocks can be used - anything from beets to wheat. Corn and sugar are just currently the easiest to use. Fuel ethanol is just ethyl alcohol - the same type of alcohol found in your martini - just at a different concentration (and flavor, unless you have really strange cocktail preferences).

Ethanol is produced by fermenting whatever sugars are present in the feedstock, then converting those to alcohol (like wine) which is then distilled (like brandy). Distillation removes water and solids from the alcohol that has been produced. (View how corn moves through a plant to become ethanol here.) Sugar cane and corn are common feedstocks because they are plentiful and well-understood crops and because they are easy to transform into alcohol, with sugar cane being the most efficient. Brazil has managed to take advantage of its geography to grow sugar cane for ethanol. The rest of us are just searching for what feedstock works best with our arable lands.

Using rice, or at least rice hulls and straw for fuel isn't unheard of. In Arkansas, there are plans by Pan Gen Global Inc. to take rice by-products and turn them into ethanol and silicates. These plans are still just that - plans. But if everything goes smoothly, the company hopes to be up and running by late 2009. Total capacity planned: 12.5 million gallons of ethanol per year.

Rice And Ethanol In Japan

Japan's need for alternatives to oil is even greater than that in America. While Japan gets 44% of its annual energy budget from oil, nearly all of that is imported. And they don't even have an ANWR to argue about. Japan doesn't have a wide range of agricultural waste that it can turn to as feedstock for biofuels, either, because it imports quite a bit of its food.

Amazingly, the relatively tiny countryside of Japan yields sufficient rice to meet domestic demand. In fact, the government has been paying farmers not to grow rice because of a supply surplus. Why not just sell the surplus on the market? Well, without government subsidies, Japanese rice is too expensive for the market. Instead, the government has been paying farmers not to farm. At the same time, many farmers have been forced to leave their small family farms. It is estimated that around 10% of Japan's fields are not in use currently. Yes, it's horribly confusing - a huge rice surplus, declining demand due to shifting eating behavior and record high prices. How high? Japanese rice costs more than twice that of other countries. As the Washington Post put it: "When it comes to rice, Japan inhabits a strange and faraway planet."

Enter rice ethanol. The project, a partnership between the government and the National Federation of Agriculture Co-operative Association, has been experimenting with growing nonfood rice on unused rice fields to supply rice to an ethanol plant for the past few years. The idea is to grow high-yield rice (who cares what it tastes like?) and process the grains in a manner similar to that which makes saki.

Right now, the proponents claim that all is sweetness and light. From the recent article in the Wall Street Journal:

Japanese rice-for-fuel production won't push up prices, as has been seen elsewhere in the diversion of corn and sugarcane for ethanol production.

 

... biofuel rice would contribute to the environment and food safety in Japan by adding greenery to the rural landscape and helping keep paddies in good condition for possible future reconversion to food-rice growth.

But the downsides are there, too. Japanese rice is grown almost exclusively on small farms, and automation is difficult, whether it is rice grown for food or for biofuel. Worst of all, last year's fuel crop sold for 20 yen per kilogram, at a time when food rice was 230 yen per kilogram. Government subsidies can only go so far to make up the difference, and the Japanese may find that turning rice into ethanol just doesn't make sense - not that rice in Japan makes any kind of sense at all.

Maybe they should keep an eye on how Pan Global's plant turns out?

Comments

[TheRealBull]

Food based ethanol is an absolute horrible idea. With food shortages (especially in rice) across the globe, even the thought of using rice as fuel is almost immoral.

My prediction is food based ethanol (rice, corn, etc) is a guaranteed long term failure. Food harvest can be unpredictable year to year and allocating a percentage of the farmed rice to fuel is surely looking for trouble. Bottom line, people will not tolerate long term high prices and volatility in their food supply just to make sure someone can drive their vehicle. If these type of policies are pushed, expect major world instability.

[ALMIR]

I will take this opportunity to add some useful words about Brazilian bio-fuels.

As rising food prices continue to threaten food security around the world, Brazilian ethanol is one obvious solution being largely ignored. Brazil set up its efficient fuel alternative program in the 70s, when the first oil crisis hit the world. Now Brazilians drive cars moved by ethanol or gasoline mixed in any proportion. And since long ago gasoline in Brazil is not pure, but blended with 25% ethanol, resulting that internal consumption of ethanol in the country is already superior to gasoline's. Ethanol in Brazil is already much cheaper than gasoline at current international oil prices.

Brazilian ethanol is produced from sugarcane without any governmental subsidies and the fuel has a very competitive price. Researchers are increasing the productivity (more fuel extracted per sq.km. of crops) by adapting sugar canes species to each type of land and topography. The productivity now is more than 3 times the records of 30 years ago and it keeps on raising, being expected to soar very soon when the technology to extract ethanol from cellulosic materials (crop waste) will be available for large scale production.

Ethanol production in Brazil uses just one percent of total arable land, and the country can expand its sugarcane fields without disturbing sensitive land areas (like Amazon), just by tapping land such as depleted pastures. Just raising intensity of cattle production from the current 0.8 animals per hectare to 1.2 animals (a target already far exceeded in many parts of the country) would release about 80m hectares of land for crops. There remains plenty of room for expansion: the country has 355 million hectares of farmable land, of which 7 million hectares under sugarcane of which the amount used to make ethanol fills 3.4 million hectares (compared to 200m hectares of pasture). Another 105.8 million hectares remained available, which allows Brazil to increase ethanol production without affecting the environment or food. By comparison, the additional terrain for Brazilian crops could surpass all of the land now under cultivation in the European Union.

Meanwhile, Brazilian food production has doubled in the past decade and that’s the most impressive thing about ethanol from sugarcane: in contrast to corn-based American ethanol or biodiesel derived from soybean oil, there is no cost pressure and no competition with food.

Another persuasive fact for incentiving ethanol production in Brazil is the electric energy that is generated as a by-product of ethanol processing: taking into consideration the energetic balance, the electricity generated in sugar cane processing in Brazil is almost as large as its ethanol equivalence. It's like a two large scale hydroelectric plants generating electricity exactly when it's more necessary: in the Brazilian dry season! So the producers of ethanol are also having increasing revenues by selling electricity to the country's national electric system, which has become an strategic and reliable source of electricity. For all these reasons, ethanol in Brazil is a win-win game for the country, the farmers, the consumers and the environment.

Off course Brazilian ethanol does not intend to concur with petroleum, but it could ease up current oil crisis by supplying a small part of the world energy demand. It is only necessary to look at the increasing demand from the non-oil countries like India and China to understand that the very high price of oil is here to stay. With the existing price of oil, the permanent threat of war in the Middle East, the international geopolitics, and the environmental problems, there seems to be no other easy solution for the energy problem away from the liquid ethanol produced out of sugarcane. This is certainly a very important aspect of the Brazilian economy for the next few years and the rest of the world will have to accept the reality of the liquid ethanol from sugarcane as the right and best solution for the oil crisis.

The problem is that much of Brazil’s ethanol exports continues to face prohibitive tariffs and other barriers to developed markets in the US and Europe. The United States currently places a 54-cent-a-gallon tariff on ethanol imported from Brazil. Consumers in the country are being severely affected, particularly in areas such as the Southeast, where corn does not exist and the logistics to bring ethanol from the center of the country is practically impossible. It is difficult to understand the maintenance these tariff levels, except for political reasons. The developed world appears purposely myopic in relation to the opportunities Brazil presents, maybe it's because that would upset wealthy US and European farmers – a price apparently not worth paying.

Almir R. Américo – Sao Paulo, Brazil ([e-mail]...

[Subsidy Eye]

Question: Will Rice Fuel the Next Ethanol Trend?

Answer: No.

[john s.gordon]

corn, wheat, rice - - anyone for potatoes, taro, whatever ?
> jack

[User 157559]

Totally agree with you Almir. Sugar IS the best way & it's a win-win situation for everyone. Unfortunately, the corn industry & their lobbyists (not to mention the subsidies) keep sugarcane from becoming a viable option...at least it won't be for the US anytime soon.

[Lisa]

Almir, thanks for your comment.

[thegruntman]

All this talk of growing food for fuel makes me think of the article a while back about a company unveiling new technology. Supposedly they have a "gadget" that will convert things like sawdust and such into a powder that is easily converted into ethanol. Does anyone know anything about it?

[Subsidy Eye]

Sawdust is already a powder.