Don't Throw Biofuels out of the Window Just Yet - Frost & Sullivan

Business Wire, July 4, 2008

CAPE TOWN, South Africa -- The Guardian newspaper has published an article today on the findings of an unpublished World Bank report on food prices. According to the paper, the report claims that biofuels have caused world food prices to increase by 75%.

Frost & Sullivan (http://www.energy.frost.com) believes there is no doubt that biofuels production has had an impact on food prices. However, this does not mean the concept of creating a "green fuel" should be thrown out of the window.

"Biofuels have undoubtedly contributed to the rising prices of some food crops," notes Frost & Sullivan Research Analyst Jhill Johns. "As the world's largest maize exporter, the U.S.'s expansion of its biofuels programme has led to a decline in grain reserves and an increase in world prices."

The production of agricultural crops for purposes other than human consumption has become the most contentious issue governing biofuel production throughout the world. This debate is particularly relevant in Africa, which has significant populations facing poverty, malnutrition and starvation.

"Rural populations spend the majority of their income on food," Johns says. "Creating alternate markets for agricultural crops therefore creates a problem."

As the biofuels debate has intensified, Africa has however also become the focus of many industrialised nations as a potential solution. This is because it has extensive amounts of underutilised land available and cheap labour for agricultural crop production.

"Southern African countries, including Botswana, Mozambique, Namibia, South Africa and Zimbabwe have an estimated 137.3 million hectares of potential arable land available between them," notes Johns. "Of this, only 17.1 per cent is presently cultivated."

Frost & Sullivan believes there is enough land available, even in South Africa, to accommodate crop production for both fuel and food. There is potentially an additional 28 million hectares of arable land in South Africa alone that is not currently being cultivated.

In addition, there is potential to generate biofuels from non-food crops. Frost & Sullivan therefore believes it is imperative that countries wishing to avoid the fuel-food competition grow non-food energy crops on degraded or marginal land.

"Jatropha has been identified as the non-food crop of choice for the production of biodiesel by many African governments," notes Johns. "It is indigenous to many local African countries and can be grown on underutilsed land. But there remains a lot of negative publicity surrounding its use, particularly around its impact on biodiversity."

Using second generation feedstocks, such as algae, will also become important as part of a holistic alternative energy approach. However, although there are a few pilot plants in operation, the technology is still not economic enough to produce biodiesel from these types of sources.

There is certainly an opportunity for African countries to access lucrative export markets for their agricultural products through biofuels - specifically to industrialised countries, but this has to be balanced with the needs and demands for basic food security. While Frost & Sullivan believes this balance is possible to obtain, it will require significant investment in both agricultural production and the development of new technologies.

If you are interested in more information on Frost & Sullivan's analysis of biofuels markets, then send an e-mail to Patrick Cairns, Corporate Communications, at patrick.cairns@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country.

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