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
40
Petrol
Diesel
30
25
20
15
10
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
M tonnes
35
Source: HGCA/DTI
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)
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
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
Brazil
US
Canada
EU
World
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
Million litres
World Fuel ethanol production
Source: FO Lichts
Brazil - ethanol
30000
Production
Million litres
25000
20000
Consumption
Exportable surplus
15000
10000
5000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: FO Lichts
US in the future
80
30000
Ethanol production
Maize usage
25000
70
60
20000
30
10000
20
5000
10
0
Source: EIA, USDA
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
0
MT
40
15000
19
Ml
50
Future Ethanol Consumption
Projected Fuel Ethanol Consumption. Source: IEA
140000
120000
Million Litres
100000
80000
60000
40000
20000
0
1975
1980
1985
1990
1995
2000
2005
2010
Year
Brazil
US & Canada
EU
World
2015
2020
EU biodiesel production
7000
6000
Others
Czech Republic**
United Kingdom
Austria
Italy
France
Germany
5000
Mt
4000
3000
2000
1000
0
2002
2003
2004
Source: EBB
2005
2006
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
UK Biofuel Production capacity
2500
2000
1500
'000 tonnes
Biodiesel
Bioethanol
1000
500
/1
1
20
10
/1
0
20
09
/0
9
20
08
/0
8
20
07
/0
7
06
20
20
05
/0
6
0
Source: Industry and HGCA
/1
19 99
91 1
/1
19 99
92 2
/1
19 99
93 3
/1
19 99
94 4
/1
19 99
95 5
/1
19 99
96 6
/1
19 99
97 7
/1
19 99
98 8
/1
19 99
99 9
/2
20 00
00 0
/2
20 00
01 1
/2
20 00
02 2
/2
20 00
03 3
/2
20 00
04 4
/2
20 00
05 5
/2
00
6
19
90
World Trends – Corn
- market is in balance and prices are adjusting
World Corn
750,000
700,000
650,000
600,000
550,000
500,000
450,000
400,000
Production
Consumption
World Trends – Corn (less Ethanol)
a depressed agriculture damages the poor most
World Corn less Ethanol Use
750,000
700,000
650,000
600,000
550,000
500,000
450,000
Production
Consumption net
/2
00
6
20
05
/2
00
5
20
04
/2
00
4
20
03
/2
00
3
20
02
/2
00
2
20
01
/2
00
1
20
00
/2
00
0
19
99
/1
99
9
19
98
/1
99
8
19
97
/1
99
7
19
96
/1
99
6
19
95
/1
99
5
19
94
/1
99
4
19
93
/1
99
3
19
92
/1
99
2
19
91
19
90
/1
99
1
400,000
Bio-fuel and petroleum price linked
– new market dynamics to manage
US cents per gallon
CBOT ethanol
NYMEX petroleum
450
400
350
300
250
200
150
100
50
0
Apr05
Jul05
Oct05
Jan06
Apr06
Jul06
Oct06
Source: HGCA
Chicago Corn v NY Gasoline
- some linkage in price but not always
Chicago Bean oil v NY Diesel
- demand leakage gives price influence
High forward prices
- will lead to a global supply response
80
290
70
270
60
250
50
230
40
210
30
190
20
170
10
150
0
130
-10
110
-20
90
CBOT SRW wheat futures $ per
tonne
World wheat price at sowing
'9
6
'9
7
'9
8
'9
9
'0
0
'0
1
'0
2
'0
3
'0
4
'0
5
'0
6
'0
7
World wheat end stocks M tonnes
Production response
Source: USDA/HGCA/SAC
Poor people can grow grain
- export possibilities from new areas
Key Exporters
Key EU Importers
Key Importers
Iran
New Exporters
New Cereal Supplies around the World
- High Prices will bring a Supply Response
Total
Land
Suitable Arable
Land
Land in
use*
Land
Available
UNITED
STATES
947
220
180
41
BRAZIL
854
169
64
105
UKRAINE
60
40
34
6
RUSSIA,
FED.REP
1,674
147
130
17
ETHIOPIA
113
24
10
13
NIGERIA
91
39
32
7
3,738
639
450
188
(Million
Hectares)
Totals
* For crop cultivation, 1994-96
Source: HGCA/FAC
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
… let’s work together to improve our world
Thank you
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