Assessors fear for oilseed prices in biofuel boom

By staff reporter

- Last updated on GMT

Related tags: Cent, Biofuel, European union, Biodiesel

The European Commission has published a new impact assessment on
the ten per cent biofuel obligation, in which it says cereal and
oilseed prices are likely to rise as a result of greater demand for
feedstock.

The European Union is aiming for ten per cent of total transport fuel to be made up of biofuel by the year 2020, and biofuel already represents a major new market grain companies the world over. The assessment predicts that 15 per cent of utilised agricultural area will be devoted to biofuels by 2020, based on the assumption that 30 per cent of production would come from second generation biofuel (biomass to liquid technology), and 20 per cent from imports from outside the bloc. The impact, however, is that growers are switching from food staples to biofuel crops in order to tap demand. Moreover, cereals previously earmarked for feedstock use may now also be channelled towards biofuels, and this competition between industries means prices are rising and farmer's margins falling. And for the food industry, ingredients companies will continue to see the impact of commodity price increases in their balance sheets - or be driven to seek out alternative raw materials. "The long-run impact of biofuels on cereal prices is expected to be in the range of three to six per cent as compared to 2006 prices,"​ said the assessment's authors at DGAgri. The largest price increases are likely to be for oilseeds, and that sunflower seed will be the worst hit, with rises of up to 15 per cent because of limited global production potential. Rapeseed is expected to see rises of between eight and ten per cent, and soybean oil prices are expected to "increase significantly"​ due to the development of biodiesel industries, mainly in Brazil and the US.

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