Biofuel sector hits crunch time

Biofuel bonanza or biofuel blunder? Are energy crops destined to bring UK farmers better profits, or shackle them to yet another commodity market with all the price pressure that brings, asks Crops editor Charles Abel in the magazine’s latest issue (Jan 27).

The reality, of course, is somewhere in between. Yes, commiting part of the crop to a reasonably priced long-term biofuel contract reduces tha farm’s risk, allowing other markets to be pursued more aggresively, safe in the knowledge that at least some crop has been sold forward at a break-even price, or better.

Biofuels also put farmers in a better light, showing them to be actively participating in the war on climate change. That is worth a lot to support farming’s fragile image in the eyes of the public.

But what if food crop prices move higher? Surely biofuel backers would then be seen as foolhardy, commited to supplying crop to an outlet trading below the open market.

Far from it. Just like any long-term commitment, those who stay loyal reap the long-term benefit.crops 07 logo small

There is every indication that biofuel markets could become premium markets. That is not just as a consequence of EU and UK policy, such as the recent proposal for all road transport fuel to contain 10% biofuel by 2020. There is also the fact that assured biofuel crops grown in the UK to a specific carbon footprint will keep out imported commodity biofuel as the public and retailers, led by Marks & Spencer, become ever-more concerned about climate change and invest hard cash in supporting biofuels that really do deliver on their beliefs.

The choice arable farmers now face is whether to sign away a proportion of their wheat for up to £91/t for 2008/9, rising to £98/t for 2012/13. That would put stability into their business and allow a vibrant biofuels sector to develop. Or do they sit on their hands and hope for higher prices that may never come, and let farming’s biggest new market since oilseed rape simply vanish overseas? The choice is yours.

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