Biofuels have limited effect on EU food prices

EU agriculture commissioner Mariann Fischer Boel has played down the likely impact of the rising demand for biofuels on the availability and price of food.
“There is a heated debate about whether we can deliver on the (EU Commission’s) 10% target for biofuels (by 2020), without putting a huge strain on our food markets,” she told European grain traders in Brussels on Friday (4 May). “Let me be clear: I do believe that we can.
“Analysis by the commission indicates that, with this target, prices for agricultural raw materials in the EU would increase by 3-6% for cereals, and 5-18% for the major oilseeds.
“But prices for those raw products influence food prices only to a very limited extent,” she said. “The cost of cereals makes up only around 1-5% of the consumer price of bread, which means that bread prices would increase by less than 1% – a hardly perceptible rise.
“The increase in vegetable oil prices would be greater. However, food-manufacturers using vegetable oils can partly replace rapeseed oil with soybean or sunflower oil.
“Moreover, the higher the level of processing in foods, the lower the share of the cost of vegetable oils in the consumer price. Therefore, in highly processed foods, for example prepared meals and chocolate bars, consumer prices would remain stable.”
Addressing the European Grain and Oilseed Convention, Mrs Fischer Boel added that a proportion of the EU’s biofuel supply would have to be imported.
“The level of imports depends essentially on the competitiveness of European production of feedstock,” she said.
“We could boost this competitiveness by abolishing set-aside and modifying the cereals intervention system. There will also be a big lift for if second-generation biofuels, based on feedstocks such as straw, become more cost-effective by 2015, as many experts predict.
“Developments such as these will still leave us needing imports. But they would ensure that the level required would not overstretch the sustainable production potential in our main supplier countries.
“Overall, then, we think that the target of 10% will not create unmanageable tensions in markets, or put resources under excessive strain.”