Impact of Energy Crops on World markets Alastair Dickie Director, Crop Marketing, HGCA

If we want biofuels, … are we going to starve? can Food and Fuel from agriculture co-exist? will we damage the Environment?

Source: HGCA/DTI UK Road Transport Fuel Use - Greener, more efficient. But still growing

Road fuels 1 st Generation biofuels Bioethanol – derived by fermentation from sugar or starch crops - UK crops – wheat, sugar beet - Global – sugar cane, maize Biodiesel – derived by methyl esterification of vegetable oils - UK crops – oilseed rape - Global – palm, soy, (jatropha)

Biomass Potentially large volumes (co-firing in power stations) or small to medium scale (on-farm or community) Used for energy generation, heat or combined heat and power (CHP) Alternative market for cereal and oilseed co-products - straw, rape meal Market for grain – out of specification, fusarium, more value to burn! Enhanced energy balance in biorefinery

EU and World positions EU The 5.75% obligatory inclusion rate will require the equivalent of 24 MT of grain Grain surplus MT 4M Ha in setaside plus land coming out of sugar production World Interest mainly with bioethanol Brazil and US are leading producers in ethanol US Energy Policy Act Renewable Fuel Standard (Sec. 1501) 7.5 billion gallons by 2012 Large biodiesel interest in EU only

World Fuel ethanol production Source: FO Lichts

Brazil - ethanol Source: FO Lichts

US in the future

Future Ethanol Consumption

EU biodiesel production

The RTFO (UK) Renewable Transport Fuels Obligation Similar concept to Renewables Obligation in the power sector Requires 5% volume of all UK fuel sold on UK forecourts should originate from a renewable source by 2010, starting fold increase on current UK sales Budget announced immediate levels of Obligation volume -2.5 % at start (April 2008) -3.75% % 2010

UK Biofuel Production capacity Source: Industry and HGCA

World Trends – Corn - market is in balance and prices are adjusting

World Corn less Ethanol Use World Trends – Corn (less Ethanol) a depressed agriculture damages the poor most

Source: HGCA Bio-fuel and petroleum price linked – new market dynamics to manage

Chicago Corn v NY Gasoline - some linkage in price but not always

Chicago Bean oil v NY Diesel - demand leakage gives price influence

Source: USDA/HGCA/SAC High forward prices - will lead to a global supply response

Iran Key Exporters Key Importers Key EU Importers New Exporters Poor people can grow grain - export possibilities from new areas

New Cereal Supplies around the World - High Prices will bring a Supply Response (Million Hectares) Total Land Suitable Arable Land Land in use* Land Available UNITED STATES BRAZIL UKRAINE RUSSIA, FED.REP 1, ETHIOPIA NIGERIA Totals3, * For crop cultivation, Source: HGCA/FAC

So let’s answer the questions! Are we going to starve? No we are going to increase the production of cereals and oilseeds to meet the new demands. This will involve cropping on land previously idle. Can Food and Fuel from agriculture co-exist? Of course they can, fuel crops and food crops will be balanced by the distribution of market prices so that supply & demand are balanced Will we damage the Environment? This is a more challenging question. As more land is drawn into production we have to beware of abuse to eco-systems and carbon efficiency

… let’s work together to improve our world Thank you