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

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

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

4. 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)

5. 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

6. EU and World positions EU The 5.75% obligatory inclusion rate will require the equivalent of 24 MT of grain Grain surplus 10-25 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 2005 - Renewable Fuel Standard (Sec. 1501) 7.5 billion gallons by 2012 Large biodiesel interest in EU only

7. World Fuel ethanol production Source: FO Lichts

8. Brazil - ethanol Source: FO Lichts

9. US in the future

10. Future Ethanol Consumption

11. EU biodiesel production

12. 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 2008 20 fold increase on current UK sales Budget announced immediate levels of Obligation volume -2.5 % at start (April 2008) -3.75% 2009 -5% 2010

13. UK Biofuel Production capacity Source: Industry and HGCA

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

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

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

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

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

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

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

21. 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 94722018041 BRAZIL 85416964105 UKRAINE 6040346 RUSSIA, FED.REP 1,67414713017 ETHIOPIA 113241013 NIGERIA 9139327 Totals3,738639450188 * For crop cultivation, 1994-96 Source: HGCA/FAC

22. 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

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