Rising demand for renewable fuels puts pressure on prices for wheat
14 April, 2006
Bakers and millers have been warned to expect a rise in wheat prices of around £20 a tonne by 2010, due to rising demand for biofuels made from wheat.
The UK government has ruled that 5% of road transport fuel should be from renewable sources by 2010, and the EU has a target of 6% by 2010. National Association of British and Irish Millers (NABIM) director general Alex Waugh told British Baker these targets equate to around 20 million tonnes of renewable fuel being used across Europe in 2010.Renewable sources for fuel include bioethanol, made from wheat and bio-diesel, made from oilseed rape. Much of this is likely to be imported into the UK, Mr Waugh said. However, as an illustration, if the UK was to rely solely on its own wheat to make its 5% renewable fuel, half the annual crop – or seven million tonnes would be required.Mr Waugh said it was more likely that 1-2% of the UK’s stipulated 5% would be sourced domestically, amounting to three million tonnes. Wheat prices were likely to be pushed up across the board, due to increased demand, although wheat used for processing was likely to be the cheaper varieties.At the moment, the UK is an exporter of wheat, but the changing pattern of demand could mean it becomes a net importer. Mr Waugh said: “If the market moves from a position of being dependent on exports to get rid of surplus to only have enough wheat for its needs, the difference could be £20 a tonne compared to the local price. Other market fluctuations will also apply and it may be that it is more than £20 a tonne. My opinion is that, all other things being equal, we are likely to see the price of wheat going up.” However, the increased demand for wheat for processing into bioethanol is likely to be a short-term phenomenon. As processing for renewable fuels becomes more sophisticated, other sources, such as straw and waste, are likely to be used.The UK is set to build its first bioethanol processing plant in Somerset in 2007.