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China's policy not to use basic food crops, especially corn, to make biofuel as a substitute for petroleum is a "sound decision", a Food and Agriculture Organization (FAO) official said yesterday.

"Such a decision by such an important world player as China is likely to accelerate the second-generation technology for production of ethanol fuel from non-food crops - through conversion of biomass," said Abdolreza Abbassian, Commodity Analyst and Secretary of FAO's Intergovernmental Group for Grains.

The UN food body official's remarks came shortly after China imposed a moratorium on projects making ethanol fuel from corn and other basic food crops. The importance of corn in China's food economy has prompted the government to ask companies to switch to non-basic food products such as cassava, sweet potato and cellulose to make ethanol fuel.

"Food-based ethanol fuel will not be the direction for China," said Xu Dingming, vice-director of the Office of the National Energy Leading Group, at a seminar on China's ethanol fuel development in Beijing on Saturday.

China is promoting ethanol fuel to reduce its reliance on imported oil. But it worries that the rising demand for raw materials for ethanol could push up food prices and reduce the area of farmland growing food crops.

Despite a bumper crop in China last year, corn prices have risen almost 30 percent over the past nine months on the Dalian Commodities Exchange. The increase in corn prices in turn pushed up the costs of fodder and meat, particularly pork.

The global supply and demand situation for cereals in 2007-08 is expected to remain tight and prices will be high, Abbassian said.

"As long as petroleum prices remain as high as they are, and without any major technological breakthrough in conversion of biomass, this trend is likely to continue for some years to come," he said.

While forecasts say cereal production across the world is likely to recover and then climb to a record, world demand for cereals is also forecast to rise sharply, Abbassian said. "This strong demand is partly driven by a rapid increase in the use of corn for making ethanol fuel, most of which is in the US."

In five years from now, almost a third of the US corn crop will be used to make ethanol fuel to meet the Energy Department's target of 11.2 billion gallons by 2012, a report released by the USGovernment Accountability Office warned last week.

"Using more corn to produce fuel is likely to push up corn prices further, potentially influencing livestock feed markets and meat prices," the report said.

The US is the world's largest producer, consumer and exporter of corn. For this reason, the US' corn export prices are considered the world's best price indicator for coarse grains in general and for corn in particular.

According to the US Department of Agriculture, about 86 million tons of corns could be used to make ethanol fuel between 2007 and 2008.

"The volume of domestic corn destined for ethanol will exceed the total corn exports from the US," Abbassian said.

The increase in the use of corn to make ethanol fuel is among the leading factors that have pushed up its price in the international market, he said.

Since the US uses more of its domestic corn to make ethanol fuel, the food and export sectors are left to shoulder the burden of high prices, Abbassian said.

(China Daily June 22, 2007)