Ernst & Young recently came out with its quarterly rankings of the investment attractiveness of the main national biofuel markets (PDF file). The report contains three indices: the All Biofuels Index, the Ethanol Index and the Biodiesel Index. No big surprise with most of the results. The report also outlines some of main deals to have occured in the global biofuels space in Q2, and notes two worrying developments. First, the German biodiesel market appears less than healthy at the moment, with many refiners operating at below 50% capacity. Second, Chinese authorities recently placed a moratorium on granting new permits for the production of cereal-crop-based ethanol on concerns over food price inflation in the country. On the positive side, the report notes growing interest in the use of jatropha as a feedstock for the production of biodiesel. Jatropha does indeed have a number of qualities that make it ideal for biodiesel production, and some money is starting to change hands in that sector. It may, however, be a tad early for investors to be able to play this. The biofuels space is an interesting beast, standing at the confluence Western governments’ efforts to protect their farmers and emerging markets’ attempts to find a in. I remain skeptical about the long-term prospects of the industry as a whole, and outright bearish on corn-based ethanol. Nevertheless, many governments are pushing so hard to make this happen that there are bound to be some opportunities in the near and medium terms.