Over the past year, small new farmhouses have sprouted, looking incongruous among the southern region's fields of sugar cane and karst mountains - similar to those in Guilin.

High prices for the commodity in the past few years have encouraged farmers to plant cane to the outmost. It has helped pad the pockets of farmers in an impoverished region left behind by the country's economic miracle.

Now, hope runs high for Guangxi's around 30 million farmers to jump on the biofuel bandwagon. Beijing has begun encouraging ethanol made from non-grain crops, such as cassava - known also as tapioca - the region's other main crop.

"We are talking about sugar televisions, sugar washing machines and even sugar brides," said Pan Xunxin, an official in Chongzuo, Guangxi's top sugar cane city west of Nanning.

"Sugar is everything for this region. In the past, farmers could not think of anything beyond getting enough food ... It would be good for farmers to have another means to earn money."

But it faces a quandary: how to get enough biomatter to sustain a raft of ethanol capacity envisioned by top grains trader COFCO and top oil producer China National Petroleum Corp.

Biofuels - energy squeezed from all kinds of living matter, such as sugar, corn or rapeseed oil that burn cleaner - are fast gaining popularity around the world in an era of sky-high oil prices and serious threats of global warming.

Beijing has already pledged subsidies for designated biofuel plants. It currently grants about 1,300 yuan (HK$1,299) a tonne - in line with US subsidies for the biofuel. There are four designated producers in the northeast, which mostly use corn.

"In the coming five years, China would develop ethanol only by using non-grain feedstock such as cassava or sweet sorghum," said an official advising Guangxi's local government. "To use cassava is more realistic and mature at this stage as we have the technology and production."

Guangxi accounts for a whopping 70 percent of China's annual cassava output of about nine million tonnes. It is already home to many producers of the cassava-ethanol used for manufacturing liquor, such as Guangxi Xintiande Energy.

The region even exported ethanol for use in cars in the United States last year, helped by record crude oil prices. Food-grade ethanol can be processed into fuel ethanol. Local officials said Beijing has given the green light for four 200,000-tonne-per-year cassava fuel ethanol plants in Guangxi, even though the government is restricting new projects for fears over- investment might threaten food security.

State-run grains trader COFCO, in charge of constructing two of those four, will invest 860 million yuan to build the first in Hepu this year. It has already bought land for a cassava plantation.

And China National Petroleum Corp has begun feasibility studies ahead of setting up plants in Wuzhou and Laibin in Guangxi, they said.

Beijing wants Guangxi to house facilities to produce as much as one million tonnes of fuel ethanol per year from cassava.

But industry officials warn it will not be easy for new fuel plants to obtain enough homegrown feedstock. Also, Beijing is unlikely to allow imports because subsidies are aimed at helping local farmers.

"The COFCO plant will face a big problem of feedstock," said another industry official in Qinzhou, which is 100 kilometers north of Hepu, where the COFCO plant is located.

"Their plantation is too small and won't be enough," he said, adding there are about 100 starch producers in the area already competing against each other over cassava.

Higher cassava prices, coupled with lower oil prices, are already squeezing margins of ethanol producers.

Privately owned Xintiande, based in Qinzhou, has suspended a plan to add 200,000 tonnes of capacity to its current 100,000 tonnes, partly due to tax changes and COFCO's first plant to be built not too far away.

COFCO, on the other hand, has difficulties finding a site for its second plant, they said. CNPC has taken two locations better suited to assuring its raw material supply.

China is already short of tapioca, importing 2.5 million to three million tonnes of cassava chips a year from Vietnam and Thailand, the world's top tapioca exporter. China is also one of the world's top sugar importers despite rises in its output. An official estimates China will need 14-15 million tonnes a year to fulfill the government plan.

Guangxi hopes to raise tapioca yield by 50 percent to about 30 tonnes per hectare by 2010, by cultivating barren land for the plant that can be grown on dry soil.

But not all are optimistic.

Asked about a possible rise in Guangxi's cassava output, Guangxi Sugar Exchange Chairman Chen Ning said: "It all depends on the prices. But at present it's more profitable to grow sugar cane than cassava, if possible."

Chen added that if Beijing were to offer support, Guangxi could produce some fuel ethanol also from molasses, a by-product of sugar, currently used for making yeast or paper in the region.

REUTERS