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Biofuel Seed Developer Ceres Looks To Cash In On 16 Years Of R&D
Ceres, which uses advanced plant breeding and biotechnology to make better seeds for biofuels, is working to commercialize its products. Ceres Chief Executive Richard W. Hamilton Richard W. Hamilton, Ceres’ chief executive, says the Thousand Oaks firm’s seeds are superior to those of competitors. (Ceres Inc. / November 3, 2013) By Ronald D. White November 3, 2013, 5:22 p.m. The road to a clean biofuels future is not easily traveled. Ceres Inc. in Thousand Oaks has some highly regarded science on its side as a producer of genetically modified seeds for crops used to make biofuels. Under the motto “Growing tomorrow’s fuel today,” Ceres has used advanced plant breeding and biotechnology to make better seeds for sophisticated versions of crops such as sweet sorghum, high-biomass sorghum, switch grass and miscanthus. Started in 1997 by a UCLA professor and his corporate partners with more than $50 million in private capital, Ceres makes seeds that can be converted into a new kind of ethanol using plant fibers instead of corn kernels or sugar cane. Ceres sells seeds and provides seeds for trials to ethanol mills, including some in Brazil, and to power producers, cellulosic biofuel companies and growers. It also has its own breeding center in central Brazil and on customers’ fields, but it doesn’t refine products into biofuels. Ceres has been and remains a research-and-development company, but it has reached that crucial stage in which it is working to commercialize its products. The company, which raised $74.75 million in its initial public offering last year, has been profitable in only three years: 2003, 2005 and 2006. Richard W. Hamilton, Ceres’ president and chief executive, is looking to better days ahead with what he touts as seeds superior to those of competitors. “From a competitive standpoint, for the second year now, our portfolio of products outperformed products from other seed companies,” he said in a conference call with analysts. “This is according to feedback from mill customers where comparable or side-by-side trials were available.” He would not otherwise comment, a Ceres spokesman said, because the company was in the process of planning for its release of fiscal fourth-quarter results this month. Hamilton joined the company in 1998 as chief financial officer, rising to chief executive in 2002 to replace Walter De Logi, who remained chairman. The Latest For the third quarter, which ended May 31, Ceres reported that it lost $9.3 million, a wider loss than the $8.4 million in the year-earlier quarter. Sales, though, rose to $1.4 million from $1.1 million. The company, which has 96 employees, also said it would cut 17 positions in a cost-saving move. On a more positive note, Ceres extended a joint market development agreement with Syngenta in Brazil, where Ceres has introduced its sweet and high-biomass sorghum varieties to some of that country’s ethanol mills. Ceres is providing seed and research support to the project. Brazil’s ethanol mills operate about 200 days a year, but the use of Ceres sweet sorghum could extend mill operations an additional 60 days a year. Accomplishments The science behind Ceres seeds is highly regarded; it involves a process similar to mapping the human genome, but Ceres was mapping the cellular level of plants. Ceres has 100 U.S. patents related to its research and an additional 200 pending in the U.S. and abroad. The crops have the commercial potential to be sturdier and more productive for biofuel production, analysts said. “These traits include high drought tolerance, high sugar content, nitrogen-use efficiency and increased biomass yields, among others,” Hamilton said. The company’s seeds have given it significant strengths, particularly in comparison with similar products from much larger competitors Monsanto Co. and DuPont Co., said research analyst Caleb Dorfman at Simmons & Co. International. “Since Ceres’ hybrids both outperformed competitors’ hybrids and demonstrated that sweet sorghum can be profitable when cultivated correctly, we believe a large-scale adoption of sweet sorghum is still likely,” Dorfman said. Challenges Even so, Dorfman said in a recent note to investors, “it has been a tough road for Ceres.” He pointed to “lackluster planting and harvest” last year and noted that the “high expectations for the 2013 harvest were crushed” when ethanol mills told Ceres that they would need another year of field trials before deciding whether to proceed with commercial-scale plantings. Ceres said it needs to reduce costs and preserve cash. The company had $37.4 million in cash and marketable securities on hand at the end of the third quarter. “While we continue to believe a capital raise is necessary,” Dorfman said, “these cuts could help delay a cash infusion until market conditions are more favorable.” The company didn’t get as much as it had hoped for in its February 2012 IPO. Originally seeking as much as $23 a share, Ceres ended up going public at $13. Shares have been hovering below $1.50 after hitting a 52-week low of $1.10 last summer. It gained 2 cents, or 1.4%, to $1.48 on Friday. Analysts Despite its challenges, Ceres still attracts some attention on Wall Street. Of seven analysts who regularly cover Ceres, two regard it as undervalued and rate it as a strong buy. Another analyst rates it as a buy for the same reason. Two analysts are hedging their bets and telling investors to hold their Ceres shares. Dorfman considers Ceres “overweight,” meaning he expects the stock to outperform competitors in the coming months. ron.white@latimes.com Continue reading
Food vs. Fuel in 2013
Food vs. Fuel in 2013 By MATTHEW L. WALD Workers harvesting sugar cane in Sertãozinho, Brazil, for use in ethanol production.Agence France-Presse — Getty ImagesWorkers harvesting sugar cane in Sertãozinho, Brazil, for use in ethanol production. In coming days, the Environmental Protection Agency’s to-do list will include setting a standard for the amount of advanced biofuels that refiners will be required to blend into gasoline and diesel supplies in 2013. The question is tricky because production in one category, cellulosic fuel from nonfood sources like corn cobs, stalks, wood chips and garbage, has not met the target set by Congress. The E.P.A. has the authority to adjust the quotas as needed, but the issue is complicated. The quotas were laid out in 2007 when Congress established a renewable fuel standard. Under its targets, production of cellulosic fuel was supposed to hit one billion gallons next year, up from 500 million in 2012, 250 million in 2011 and 100 million in 2010. But so far output is near zero because no one seems to have hit on a commercially successful recipe. So far the E.P.A. has had little choice but to repeatedly waive nearly all of the cellulosic requirement, but this has led to bitter complaints from the refiners, who say they are still required to use small quantities of a fuel that does not exist or face fines. Even as the agency waived most of the cellulosic requirement, it kept intact a larger 2.75 billion-gallon quota for “advanced” biofuels in general, which includes cellulosic, ethanol made from Brazilian sugar cane and biodiesel made mostly from soybeans. Production of biodiesel or sugar-cane ethanol is favored because each process emits relatively little carbon dioxide, the predominant greenhouse gas, meaning it has an advantage on the global warming front. Keeping the quota for advanced fuels intact was more or less O.K. when the agency waived smaller cellulosic mandates, said Jeremy I. Martin, a senior scientist in the Union of Concerned Scientists’ clean vehicles program. But it’s going to be a problem if the agency waives a one billion gallon requirement for 2013, he warned. If the overall 2.75 billion quota for advanced fuels is not reduced, the biodiesel and the sugar-cane ethanol will have to make up the difference. And if that happens, Mr. Martin argues, the quota will start putting more pressure on food supplies. Various other industrial users of food, especially companies that raise chickens, turkeys, hogs and beef, have meanwhile been trying to get the mandate for corn ethanol reduced, but the E.P.A. has declined to do so. The biofuel industry has been pushing hard to maintain the quotas, with waivers for cellulosic fuels as needed, year by year. A new industry report catalogs a growing number of efforts to produce cellulosic biofuels, albeit commercially unsuccessful ones. “All in all, the post-election environment in Washington seems to promise continuation of stable policy support for advanced biofuels commercialization and the robust growth of the industry,” Brent Erickson, executive vice president of the Biotechnology industry Organization said in a letter to supporters this month. Mr. Martin’s theory is that E.P.A. should stay the course. “We’re going to have to accept that the cellulosic fuels are late,’’ he said, but it would be better to delay the quotas than to eliminate them. “Going in the right direction a little more slowly is better than going in the wrong direction,’’ he said. Continue reading
Biofuels Producers Hunting Foreign Fields
With nearly 70% of global biofuels production centered on the United States’ corn and Brazil’s sugarcane harvests, concentrated commodity feedstocks have been the common denominator in biofuels industry growth over the past decade. Advanced biofuels companies seeking to produce next-generation fuels derived from non-food feedstocks are attempting to replicate this model – without the associated social and environmental ramifications of using food-based crops. Access to land for mass feedstock production is a difficult challenge for which many innovative strategies have been proposed. Companies like SG Biofuels , Ceres , and others are squarely focused on biotechnology innovation, involving complex biological modifications at the crop’s cellular and genetic level. The central focus of these efforts is the optimization of dedicated energy crops for growth in a variety of locations where food crops are not currently grown, including poor soils and areas lacking irrigation. Among these, jatropha, camelina, energy grasses like miscanthus, and dedicated trees like eucalyptus have received the most attention. But optimizing crop strains to thrive in a variety of climates and soils is only half the battle. Recent experience has shown that the success of even miracle next-generation feedstocks like jatropha , which can produce oil-rich seeds in poor soils and without irrigation, is exaggerated. As with food crops, bountiful energy crop harvests (i.e., lots of biomass material for biofuels production) require irrigation, nutrients – and plenty of land. Land Ho! Finding suitable tracts of land with nutrient-rich soil and irrigation for which a large quantity of crops can be grown – but without diverting land otherwise dedicated to food production (see The New York Times blog on food vs. fuel ) – remains an elusive goal. Increasingly, governments and corporations are looking abroad. Since the food crisis of 2007-2008 , foreign direct investment into countries with undeveloped agricultural potential has accelerated. According to data compiled by the Oakland Institute , an estimated 56 million hectares of land (nearly the size of France) has been acquired in the developing world by international governments and investors since 2008. Last month, China announced that it will invest billions of yuan into 3 million hectares (7.5 million acres) of farmland in Ukraine, its biggest overseas agricultural project. This will more than double China’s current portfolio of 2 million hectares (5 million acres), mostly concentrated in Latin America and Southeast Asia. China is not alone in this quest. According to a policy paper published by the Woodrow Wilson International Center, “One of the largest and most notorious deals is one that ultimately collapsed: an arrangement that would have given the South Korean firm Daewoo a 99-year lease to grow corn and other crops on 1.3 million hectares of farmland in Madagascar – half of that country’s total arable land.” Government and institutional investors across other developed economies, including Japan, the United States, the European Union, and wealthy Gulf states, are all actively involved in this rush. Complicated by the checkered history of international land grabs, this trend is not without its critics. Balancing Objectives While intentions may be in the right place in most instances, the past has shown that the consolidation of cultivatable land for foreign or multinational interests can often lead to the displacement of local subsistence farmers, as well as other negative environmental impacts. In recent years, governments have, at least publicly, imposed more restrictions on biofuels investments abroad to prevent a scramble toward destructive plantation-style feedstock cultivation. The EU’s Renewable Energy Directive (RED) mandates that member states derive 10% of energy consumption within the transportation sector from renewable sources by 2020. Recently signed legislation caps the contribution of conventional food-based biofuels , calling for a rapid switch to advanced biofuels. A slew of sustainability standards , meanwhile, aim to mitigate the negative impacts of large-scale dedicated energy crop production for advanced biofuels. In Navigant Research’s recently published report, Advanced Biofuels Country Rankings , issues such as available arable land and the potential for sustainable feedstock hubs figure heavily into assessments of the potential of individual countries to support advanced biofuels commercialization. At one time regarded as an issue exclusively focused on conventional biofuels, access to land for advanced biofuels production is proving equally sensitive. Continue reading
