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Impact of Energy Crops on World markets

Impact of Energy Crops on World markets. Alastair Dickie Director, Crop Marketing, HGCA. If we want biofuels, …. are we going to starve? can Food and Fuel from agriculture co-exist? will we damage the Environment?. UK Road Transport Fuel Use - Greener, more efficient. But still growing.

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Impact of Energy Crops on World markets

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  1. Impact of Energy Crops on World markets Alastair Dickie Director, Crop Marketing, HGCA

  2. If we want biofuels, … • are we going to starve? • can Food and Fuel from agriculture co-exist? • will we damage the Environment?

  3. UK Road Transport Fuel Use - Greener, more efficient. But still growing Source: HGCA/DTI

  4. Road fuels • 1st Generation biofuels • Bioethanol – derived by fermentation from • sugar or starch crops • - UK crops – wheat, sugar beet • - Global – sugar cane, maize • Biodiesel – derived by methyl esterification • of vegetable oils • - UK crops – oilseed rape • - Global – palm, soy, (jatropha)

  5. Biomass • Potentially large volumes (co-firing in power stations) • or small to medium scale (on-farm or community) • Used for energy generation, heat or combined heat and power • (CHP) • Alternative market for cereal and oilseed co-products • - straw, rape meal • Market for grain – out of specification, fusarium, more value to burn! • Enhanced energy balance in biorefinery

  6. EU and World positions • EU • The 5.75% obligatory inclusion rate will require the equivalent of 24 MT of grain • Grain surplus 10-25 MT • 4M Ha in setaside plus land coming out of sugar production • World • Interest mainly with bioethanol • Brazil and US are leading producers in ethanol • US Energy Policy Act 2005 - Renewable Fuel Standard (Sec. 1501) 7.5 billion gallons by 2012 • Large biodiesel interest in EU only

  7. World Fuel ethanol production Source: FO Lichts

  8. Brazil - ethanol Source: FO Lichts

  9. US in the future

  10. Future Ethanol Consumption

  11. EU biodiesel production

  12. The RTFO (UK) • Renewable Transport Fuels Obligation • Similar concept to Renewables Obligation in the power sector • Requires 5% volume of all UK fuel sold on UK forecourts should originate from a renewable source by 2010, starting 2008 • 20 fold increase on current UK sales • Budget announced immediate levels of Obligation volume • 2.5% at start (April 2008) • 3.75% 2009 • 5% 2010

  13. UK Biofuel Production capacity Source: Industry and HGCA

  14. World Trends – Corn- market is in balance and prices are adjusting

  15. World Trends – Corn (less Ethanol)a depressed agriculture damages the poor most World Corn less Ethanol Use

  16. Bio-fuel and petroleum price linked – new market dynamics to manage Source: HGCA

  17. Chicago Corn v NY Gasoline - some linkage in price but not always

  18. Chicago Bean oil v NY Diesel- demand leakage gives price influence

  19. High forward prices - will lead to a global supply response Source: USDA/HGCA/SAC

  20. Key Importers Key Exporters Key EU Importers New Exporters Poor people can grow grain- export possibilities from new areas Iran

  21. New Cereal Supplies around the World- High Prices will bring a Supply Response * For crop cultivation, 1994-96 Source: HGCA/FAC

  22. So let’s answer the questions! • Are we going to starve? • No we are going to increase the production of cereals and oilseeds to meet the new demands. This will involve cropping on land previously idle. • Can Food and Fuel from agriculture co-exist? • Of course they can, fuel crops and food crops will be balanced by the distribution of market prices so that supply & demand are balanced • Will we damage the Environment? • This is a more challenging question. As more land is drawn into production we have to beware of abuse to eco-systems and carbon efficiency

  23. … let’s work together to improve our world Thank you

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