There was an unmistakable buzz of optimism among visitors at
this year's Cereals event (13-14 June), undoubtedly fuelled
by better commodity prices and the prospect of a fledgling biofuel
industry finally getting off the ground.
But, with wheat prices rising to over £100/t and oilseed rape
nearer £170/t - ironically partly due to biofuel demand - tough
questions have been raised about the viability of using such
feedstocks at current ($69/barrel) crude oil prices.
Former AICC chairman
Allen Scobie was one of those who feared that current prices could
slow the development of the bioethanol sector in particular.
"All models have been based on wheat at £80/t. They just don't
stack up at £100-£110/t, so I don't think anyone will be in a hurry
to start laying bricks."
While bioethanol markets needed more time, he thought the EU
biodiesel market would develop reasonably well. "Regardless, it's
good for UK farmers so long as it keeps supporting prices."
Ian Munnery at United Oilseeds was also cautious about the
current biofuel hype. The sector would only grow provided it was
cost-effective and companies could make a profit. "It all comes
down to price." Energy aid payments were unlikely to make a
significant difference, he added. "The problem is that energy
payments depend on plantings. If the area increases [due to better
prices], the amount paid will fall - especially when you include
modulation on top."
| Funding problems delay starch
plant |
|---|
| Delays caused by funding and planning problems at the £80m
Immingham bioethanol plant mean that the first year of Centaur's
starch contract is no longer valid. "We're still looking to sign
people up for harvest 2009-13 on the same basis as the previous
contract," said John Bromwich from Bioethanol Ltd. People who
signed up first time around were being re-approached and, despite a
contract price of £78.50/t, a "significant majority" were
re-signing, he said.
Velcourt Farms was among those who signed up originally. "Those
contracts are now technically void and that grain will be put onto
the open market," said farms director, Richard Williamson. The firm
remained supportive of the concept and said it would consider
future offers.  |
|
Grainfarmers' Andrew Barnard acknowledged that current grain
prices were a concern for future expansion, and believed the wheat
price threshold for bioethanol production was nearer £90/t.
But he was optimistic about the future, particularly as the
Renewable Transport Fuel Obligation (RTFO) would require transport
fuel suppliers to ensure that 5% of all UK road vehicle fuel was
from renewable sources by 2010. "All the oil majors are taking more
notice now," he said.
A similar view was shared by Richard Whitlock from
Frontier, who predicted a recovery in global
stocks and a downturn in future prices. "And British free-trade
policy says it isn't just for the domestic industry to supply
the biofuel market, so we will be subject to cheaper supplies
coming in."
Certainly, with some planned facilities requiring more than 1m
tonnes of wheat when fully operational, it is unlikely that this
can be met by domestic supplies alone. Nick Oakhill from Glencore
said the Ensus bioethanol plant on Teesside (which Glencore will be
supplying) would require 1.1-1.2m tonnes from the 2009 harvest.
"For harvest 2008 we will be looking to source primarily from the
UK, but by 2009, we realise we will have to import some."
Contracts had not been offered to growers yet, as the firm was
waiting until energy crop regime details had been confirmed, he
said. "Also, at current prices (£109/t for November), it's very
unlikely that growers will be booking up crop that far in
advance."
paul.spackman@rbi.co.uk