Cheap wheat may help to sat­isfy EU fuel de­mand

Weekend Argus (Saturday Edition) - - BUSINESS -

LON­DON: A sharp de­cline in wheat prices driven by a sup­ply glut is set to lead to more of the grain be­ing turned into mo­tor fuel in the Euro­pean Union.

De­mand for bioethanol, a re­new­able sub­sti­tute for petrol nor mally made from ei­ther grains or su­gar crops, is in­creas­ing in the EU. It is seen as a way to re­duce emis­sions of the green­house gases, be­lieved to con­trib­ute to cli­mate change.

Wheat is now in pole po­si­tion to help meet the de­mand with the price of al­ter­na­tive feed­stock su­gar ris­ing to the high­est lev­els in nearly three decades ear­lier this month and su­gar-de­rived bioethanol im­ports from Brazil on the wane.

“Those plants that are flex­i­ble in the pro­cess­ing could switch to wheat and get a very cheap feed­stock,” said Rob Vier­hout, sec­re­tary gen­eral of the Euro­pean Bioethanol Fuel As­so­ci­a­tion (eBio) in Brus­sels.

Wheat fu­tures have fallen sharply to con­tract lows in Paris dur­ing the past few weeks, de­pressed by larg­erthan-ex­pected har­vests in both France and Ger­many.

Wheat was the most im­por­tant feed­stock for bioethanol pro­duc­tion in the EU in 2007, the most re­cent year for which a break­down is avail­able, with a 39 per­cent share. Grains (in­clud­ing bar­ley, maize and rye) ac­counted for two-thirds, ac­cord­ing to eBio statis­tics.

That to­tal should rise sig­nif­i­cantly. En­sus should bring on­line later this year the largest biore­fin­ery in Europe in north­east Eng­land which will use about 1.1 mil­lion tonnes of wheat to pro­duce about 400m to 450m litres of bioethanol.

In 2010, Vivergo is due to bring on­line a sim­i­lar size plant in east­ern Eng­land which is also ex­pected to use wheat.

“I can well ex­pect that more grain will be used (to pro­duce bioethanol) as it can now be bought very cheaply,” said Frank Bruehn­ing, spokesman for the Ger­man bio­fu­els in­dus­try as­so­ci­a­tion VDB.

Vier­hout of eBio said that bioethanol de­mand in the EU should rise this year to more than 4 bil­lion litres, up from about 3.5bn last year, as EU coun­tries use more bio­fuel.

“Tar­gets in most of the coun­tries are go­ing up year by year and there is less sup­ply from Brazil. Those two (fac­tors) will make sure we have more ca­pac­ity be­ing utilised.”

EU bio­fuel de­mand is mainly driven by po­lit­i­cal tar­gets rather than price of oil.

The EU had di­rected that 10 per­cent of trans­port fuel must come from re­new­able re­sources by 2020.

Brazil­ian ship­ments to the EU are fall­ing, partly due to strong do­mes­tic de­mand which cut the amount avail­able for ex­port. There has also been a switch in Brazil to­wards us­ing more sug­ar­cane to pro­duce su­gar, rather then bioethanol, sparked by a sharp jump in prices for the sweet­ener.

Brazil­ian ethanol ex­ports to Euro­pean coun­tries from Jan­uary through June this year to­talled 557 000 litres, down from 726 000 litres in the same pe­riod last year.

For the EU’s bioethanol in­dus­try to con­tinue to thrive it will not, how­ever, only have to com­pete on price. It must also prove it can con­trib­ute to the fight to stem cli­mate change.

Brazil­ian bioethanol has been shown to sub­stan­tially re­duce emis­sions of green­house gases as com­pared to min­eral oil and has set a stan­dard. – Reuters

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