Impact of Energy Crops on World markets
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Impact of Energy Crops on World markets
Alastair Dickie
Director, Crop Marketing, HGCA
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If we want biofuels, …
• are we going to starve?
• can Food and Fuel from agriculture co-exist?
• will we damage the Environment?
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Source: HGCA/DTI
UK Road Transport Fuel Use- Greener, more efficient. But still growing
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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)
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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
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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
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World Fuel ethanol productionM
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Brazil
US
Canada
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World
Source: FO Lichts
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Brazil - ethanol
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Source: FO Lichts
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US in the future
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Ethanol production
Maize usage
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Future Ethanol Consumption
Projected Fuel Ethanol Consumption. Source: IEA
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EU biodiesel production
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Source: EBB
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Others
Czech Republic**
United Kingdom
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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
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UK Biofuel Production capacity
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Biodiesel
Bioethanol
Source: Industry and HGCA
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World Corn
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Production
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World Trends – Corn- market is in balance and prices are adjusting
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Production Consumption net
World Corn less Ethanol Use
World Trends – Corn (less Ethanol)
a depressed agriculture damages the poor most
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Source: HGCA
Bio-fuel and petroleum price linked – new market dynamics to manage
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Chicago Corn v NY Gasoline
- some linkage in price but not always
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Chicago Bean oil v NY Diesel - demand leakage gives price influence
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Production response World wheat price at sowing
Source: USDA/HGCA/SAC
High forward prices - will lead to a global supply response
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IranKey Exporters Key Importers
Key EU Importers New Exporters
Poor people can grow grain- export possibilities from new areas
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New Cereal Supplies around the World- High Prices will bring a Supply Response
(Million Hectares)
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
Totals 3,738 639 450 188* For crop cultivation, 1994-96 Source: HGCA/FAC
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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
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… let’s work together to improve our world
Thank you