Does Energy Grow On Trees?: Jatropha Plant to Address India’s Fuel Needs

Today the WSJ reports that jatropha (pictured), a plant found throughout India, represents a major potential source of energy. The “ugly” shrub’s potential centers on the oil contained in its “golf-ball-size” fruit, which can be refined into biodiesel. Horticulturally-derived fuel, particularly from corn and sugarcane, is already an important source of alternative energy for many countries. Within the U.S., farm states like Iowa and Nebraska have experienced significant economic growth due to government incentives for ethanol production and Brazil has been particularly successful at reducing its oil imports by promoting the consumption of ethanol produced from sugarcane.

However, unlike corn and sugarcane, both of which are edible, jatropha has no value as a foodstuff. This means that jatropha used for biodiesel production will not make food more expensive or “divert resources away from crops that could be used to feed people”. The plant, which was formerly considered to be relatively useless beyond its ability to be grown as a hedge, keeping wild animals from entering farms, is also attractive due to its hardiness and ability to grow in difficult environments (“deserts, trash dumps, and rock piles”). It is also requires little water or fertilizer to thrive, both products which may be expensive or hard for poor farmers to come by. Other sources of biodiesel like corn and palm oil, require large amounts of water and land, jatropha is less picky.

The economics of jatropha biodiesel appear to be attracting the attention of some big players in the international energy industry. Some estimates place the per-barrel cost of refining jatropha at $43, half as much that of corn. With oil hovering at $70 per-barrel, this could make large-scale biodiesel production competitive without market-distorting government subsidies. BP recently invested $90 million in a joint venture with another British firm to develop jatropha biodiesel production in India as well as other countries.

Although some worry the flow of money into jatropha could suddenly dry up if the plant doesn’t live up to the hype and horticulturists caution that little is known about the plant due to its only new-found notoriety , some feel that jatropha oil could play a significant role in growing India’s biofuel capacity, something the Wire first profiled here.

Sec. State Rice Optimistic about Nuclear Deal, Receives Forbidden Mangoes

During yesterday’s US-India Business Council meeting in Washington, the focus was supposed to be on civilian nuclear cooperation. Ultimately, as the WSJ notes, “mangoes carried the day”.

US Secretary of State Condoleeza Rice (pictured) spoke to the assembled Indian and US businessmen and acknowledged that progress on the nuclear cooperation deal had been slow but noted that she was “certain that we will reach final agreement and be in a position to complete this deal by the end of the year.” As Kesav reported for the Wire before, the agreement has stalled recently due to a variety of concerns.

Following the speech, India’s media adviser Sanjaya Baru presented a basket of mangoes to Rice and declared:

“[mangoes are] “the best symbol of the diversity of Indian society and democracy. Nothing divides the Indian people more than our differences on which is the best variety of mango — we have 700 of them — but nothing unites the Indian people more than our firm belief that this is truly the king of fruits.”

Following on this, FedEx International president Michael Drucker, took credit for his company’s role in the presentation saying, “We’ve shown you today what FedEx can do. It can connect the world together by bringing mangoes to you”.

Long banned from the by US Department of Agriculture, Indian mangoes were only approved for import in late Ma as the Wire previously reported. There was no indication whether the mangoes presented to Rice were the Alphonso variety, highly prized by mango enthusiasts.

Picture by AP/Manuel Balce Ceneta

US Official Rips India for Failure of Trade Talks

As the Wire reported below, recent trade talks between the US, EU, India, and Brazil ended in failure as participants were unable to reach any comprehensive agreement. The dispute centered on the developing countries demands for reduced farm subsidies in the US and EU combined with the West’s insistence on greater access to domestic markets in India and Brazil.

In the wake of the Potsdam conference, senior negotiator and US Trade Representative Susan Schwab (pictured) indicated in an interview that she was “surprised” by India and Brazil’s “rigid negotiating positions”. Schwab felt that negotiators from these countries had been much more willing to compromise in previous negotiation sessions. Schwab speculated that the major reason behind this shift could be fears over trade deficits with China. Currently, India has a small trade surplus with China but there are concerns this may eventually become a deficit. In the interview she noted:

“There has been some backtracking [by developing countries] in the last two months because of concerns about China. Another factor is the sense that some of the more protectionist developing countries could hide behind the differences of others. It was only when the EU and the US made progress on agriculture that their positions were smoked out. They [Brazil and India] came to Potsdam with very rigid positions.”

Schwab also accused Brazil and India of selling out to other developing countries in order to find a common negotiation position, making it harder for their negotiators to be flexible when presented with offers by the US and EU:

“What you have seen is they spend huge amounts of time and political capital fighting it out internally and then they preclude their leaders [Brazil and India] from taking different positions – at Potsdam, Brazil and India were taking the same positions as they had almost two years ago.”

Although she expressed her disappointment regarding India and Brazil’s mutual inability to “provide leadership to the developing world” she was most critical of India, which many have accused of coming to the trade talks “expecting the negotiations to fail”. According to Schwab, India was able to get Brazil to choose “[developing country] solidarity over its economic interests”.

Photo of Susan Schwab from USTR

Pointing Fingers in Potsdam: Trade Talks Collapse

Trade talks between the US, EU, Brazil, and India ended today with each side blaming the other for the lack of progress. The WSJ reports that although the three-day event did not involve the participation of all 150 WTO members, the inability of the organization’s four most powerful parties to reach a compromise makes more a comprehensive trade agreement much more unlikely.

As with the Doha Round of trade talks, which began in 2001, the major area of disagreement on eliminating barriers to trade focuses on farm subsidies in industrialized nations and closed markets in developing countries.

For the part of developing countries, EU Trade Commissioner Peter Mandelson placed the blame on India and Brazil noting,

“It emerged from the discussion … that we would not be able to point to any substantive or commercially meaningful changes in the tariffs of the emerging economies, as a reasonable return on what we are paying into the round.”

Echoing this, President Bush accused India and Brazil of being more concerned with their own interests than helping more impoverished countries adding through a spokesman,

“[that he was] disappointed that certain countries are blocking an opportunity to expand trade and large economies like Brazil and India should not stand in the way of progress for smaller, poor developing nations.”

In response, Brazil Foreign Minister Celso Amorim and Indian Commerce Minister Kamal Nath blamed the US and EU for the talks’ collapse saying,

“It was useless to continue the discussion given what was on the table … This round is about trade flows from developing countries to developed countries, not the other way round [but the West was only interested in] perpetuation of the inequalities in global trade.”

The insistence of Brazil and India that farm tariffs be lowered has been problematic, particularly for the EU, which protects its farmers through high tariffs on agricultural imports. Similar difficulties have resulted from calls for the US to reduce its level of farm subsidies. Developing countries argue that both these policies result in a lower price for agricultural goods on the international market, negatively impacting their ability to achieve economic growth through greater exports.

Although officials reported that the EU had exhibited a degree of flexibility on the farm tariff issue, increasing a tariff cut on protected products from 60% (last offered in 2005) to 70%, India was unwilling to open its agricultural sector to greater foreign competition. Both Brazil and India offered significantly less market access than the US and EU had hoped for. Addressing this concern, US Agricultural Secretary Mike Johanns has noted that India’s proposal that 20% of its existing farm tariffs be left untouched would result in “an outcome [that] would shield up to 95% of what India imports from cuts”.

Although Foreign Minister Amorim described the failure as a definite “setback”, US Trade Representative Susan Schwab (pictured) noted that the US was not ready to “give up on negotiations”.

Picture of WTO OMC: ©AFP/File – Fabrice Coffrini

Picture of Susan Schwab: ©AFP/File – Eric Piermont

More Mango News: The Alphonso Cometh

As Kesav noted below, when the Indian mango industry enters the information age with the opening of an online commodities marketplace on June 15th, there will be important impacts for mango buyers both in India and abroad.

Another important development for “mango enthusiasts” occurred in late May, as the first shipments of the “particularly sweet and fragrant” Alphonso cultivar (pictured above) arrived in the Washington, DC area. As the Washington Post reported, Indian mango exports to the US had been banned by the Department of Agriculture for almost two decades due to concerns over insect pests. In order to gain entry into the US, exporters were required to setup facilities that could irradiate the fruit before it left India. Only one USDA-approved irradiation facility has been constructed but more are planned according to US retailers.

Experts stress that although Alphonsos are of significantly higher quality the “ubiquitous” mangoes grown for the US market in Mexico and Central America, the high price of this specialty fruit may turn off some Americans with less-discerning tastes. According to the WaPo, Alphonsos cost as much as five times more than their (larger) Central American brethren.

Cyber Mangoes

  Mangoes of all shapes, sizes and flavors, born and raised in various parts of South India, will be available for online-trading beginning this month, according to a report in the June 15th edition of the Hindu. The Safal National Exchange of India (SNX), which specializes in providing an online marketplace for perishable commodities, matches seller-farmers with prospective buyers allowing farmers to get a fair return on their produce. SNX also provides a counter-party guarantee with respect to all trades as well as arranging for quality certification, warehousing and logistics.

What’s exciting for any mango enthusiast who is familiar with India’s mangoes is that now, they will be more accessible to buyers across the globe in the myriad species that delight Indians every year.  No less important is the fact that the conscientious buyer can rest easy knowing that the farmers are getting a fair and competitive price. The India Times reported that the first day of trading saw 24 tons of mangoes traded followed by 16 tons on the next day. The mechanics are quite similar to any online trading system. Farmers set prices according to prevailing market conditions and the prices are displayed on the trading portal. Once a buyer finds a seller, the trade is complete and farmers receive their money within two days of the trade. The delivery deadline is set for the end of the following trading day. SNX seems to impose a 10% penalty for failure to execute on either the buyer or seller’s part.

What will be interesting to monitor is when online mango trading takes off on a global scale and foreign buyers seek enforcement of any unfulfilled contracts. SNX’s growth as a self-regulated organization with effective remedial procedures is vital to its sustained success.