A Weedy Contribution to the Biofuel Movement

You can't eat your cake and burn it too.

What seemed like an excellent alternative energy strategy just a couple years ago has become the latest victim to the great commodities squeeze of high prices and tight supplies.

As farmers divert crops to the production of ethanol and biodiesel, food prices rise.

Take corn, for example. In 2006, one-fifth of U.S. corn production was used for ethanol. That compares with 12 percent two years earlier. Meanwhile, prices have surged. Corn hit a record high of $6.47 a bushel on futures markets this year, having traded at about $2.20 two years ago.

A weed might offer a solution to this dilemma. Jatropha curcas -- a wild poisonous shrub that grows in poor soil conditions,  needs little water and is pest- and drought-resistant -- yields seeds that average a 31-to-37 percent oil extraction rate and is easily converted into high quality biodiesel.

Moreover, jatropha plants absorb atmospheric carbon dioxide as its oil burns with a clear, smokeless flame. It is also carbon neutral.

Given those qualifications, it has its share of supporters.

Goldman Sachs recently cited jatropha as one of the best candidates for future biodiesel production.

India's state railway ministry has been using jatropha-sourced biodiesel to run its Mumbai-Dehli line since 2006. In fact, the rail line itself is planted with jatropha and the government has ordered state-run oil companies to purchase jatropha-sourced biodiesel.

GRAINSTOCK OIL YIELDS

Grainstock	Liters/Hectare
Soy	0.7
Rapeseed/Canola	1.2
Jatropha	3.2
Palm	4.5

*Courtesy Van Der Horst Biodiesel

Meanwhile. companies like Australia’s Mission Biofuels and Singapore’s Van Der Horst Biodiesel are hoping to cash in on its promise.

Mission Biofuels has 650,000 acres planted, with 25,000 contract farmers in India. The company has one refinery in Malaysia in operation already and a second one that will be ready at the end of the year. Together, will they will capable of processing 350,000 tons of oil annually.

"We're currently focusing on jatropha plantation and procurement and distribution of jatropha seeds to our partners in India," says Peter Williams, the company's finance director.

Peter Cheng, CEO of Van Der Horst,  says his company has invested about $148 million in jatropha over a four-year period. The company has 10,000 hectares (about 25,000 acres) of jatropha planted in Cambodia, China and Indonesia, plus a 200,000-ton capacity refinery in Malaysia which will use an enzyme process to convert crude jatropha oil into biodiesel, cutting processing costs. The refinery comes online at the end of 2009.

Both Mission and Van Der Horst give a ballpark estimate delivery date of jatropha oil for the global commercial market as late 2009.

SPOT PRICE BIODIESEL

Product	Bid ($/ton)
Palm	1,200
Rapeseed/Canola	1,460
Soy	1,280

*Argus Biofuels, April 2008

Moreover, when jatropha oil hits the commercial market, it is expected to be cost less than current sources of biodiesel.  Cheng estimates that jatropha oil will cost $1,100 a ton in comparison to palm oil at roughly $1,200 a ton.

But can the ugly green bush live up to all these expectations?

Critics point out that though the plant can grow in arid environments, it produces more seeds -- hence more oil -- in fertile, well-watered soil. 

Cheng acknowledges that distinction but adds that even if the jatropha oil yield from poor soil is low, a valuable biofuel is being generated from land that is unsuitable for food-producing purposes.

© 2009 CNBC.com