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January 04, 2010

Toyota Tsusho to produce jatropha as biofuel

Toyota Tsusho Corp., the trading affiliate of Toyota Motor Corp., plans to start growing jatropha as it bets that higher crop yields and oil prices will make the plant a profitable alternative fuel.

The Nagoya-based company is in negotiations with a Philippine banana plantation to produce the leafy green shrub, Makoto Hattori, a project development manager, said in an interview, without naming the company or disclosing the size of the investment.

Fuel made from jatropha seeds helped power a Boeing 747 flight last year, as record oil prices spurred companies to grow corn, sugarcane and other plants to produce biofuels. Toyota Tsusho bought a stake in Singapore-based seed researcher JOIL(S) Pte. this year to develop a better plant after erratic yields prompted BP Plc and rivals to pull out of production ventures.

“We need to dramatically increase the plant’s yield in order to make this profitable,” Mr Hattori said in an interview. Rising oil prices and government legislated use of biofuels would also help make the business viable, he said.

Crude oil has rallied 77 per cent this year as a rebound in emerging markets pushed prices to the highest level in 12 months in October. Jatropha, found in subtropical countries, isn’t edible and can grow in arid lands unsuitable for farming, unlike sugar and corn.

Mr Hattori said he expects the business to be profitable within five years, without giving a specific forecast. Research at JOIL, which specialises in tissue cultures and selective breeding of the plant, is headed by Nam-Hai Chua, winner of Japan’s International Prize in Biology in 2005.

Government initiatives by countries including Myanmar and India that encouraged farmers to grow the plant failed because officials didn’t successfully address how to turn the seeds into fuel, Hattori said.

“Past failures with jatropha by others were largely a result of a lack of consideration about the downstream logistics of processing and marketing the crop,” he said.

The trading house may partner oil refineries in the future, Hattori said. The investments are part of a plan by Toyota Tsusho to reduce its reliance on Toyota Motor and generate profits from new business lines. The company’s shares have rallied 45 per cent this year, outpacing the 6 per cent gain by the benchmark Topix index.

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