Food or fuel? The world has enough for both.
By Naveen Thukral and Sambit Mohanty
SINGAPORE (Reuters) - Surging demand for vegetable oils and grains from the emerging biofuel sector is unlikely to create shortages for the food industry but it could take a toll on demand as prices go through the roof.
Industry experts said spiraling prices of vegetable oils against a backdrop of declining petroleum prices could weaken the competitive footing for the biofuel industry and slow expansion, freeing up availability for edible oils for the food sector.
"There is no shortage of edible oil at the moment but prices have been driven higher by this talk of biofuels," M.R. Chandran, an independent industry analyst and a former head of the Malaysian Palm Oil Association, told Reuters.
"It has already made palm oil out of reach for many people in India and China where purchasing power is less," he told the Reuters Global Biofuels Summit.
Georges Mercadal, director of Singapore-based CMS Resources, said: "I do see the potential for inflationary push because the demand for fossil fuels is going up."
Crude palm oil, the main raw material for biodiesel, now costs $554 a ton, after gaining some 40 percent in 2006. And crude petroleum is quoted around $361 a ton, down more than 34 percent from the record high of $551 in July last year.
Malaysia and Indonesia, the world's two leading palm oil producers, have set aside six million tons each from their annual output for the making of biofuel.
But industry officials said it would take a long time for that quantity to be used up because of a lack of processing capacity.
"I would think that there is enough palm oil in the world which can be used for biofuels and you could also have enough left over for the food industry," said a leading commodity trader who attended the Reuters Summit in Singapore.
In the grain market, buoyant appetite for corn for making ethanol has already lifted prices on the Chicago Board of Trade to its highest levels in a decade.
And Monte Shaw, president of the Iowa Renewable Fuels Association told the summit that demand for corn-based fuel, such as ethanol, might increase prices of the grain even further, but there would not be significant hit to the consumer.
"A 12-ounce box of cornflakes costs $2.79, but there's less than a penny's worth of corn in it. So let's say that corn goes from $2 to $4, well you've just changed the price of cornflakes from $2.79 to $2.80. Big deal," Shaw said.
Industry officials attending the summit said the United States would be able to produce enough corn in coming years to meet the domestic demand for food and ethanol, in addition to meeting its export obligations.
BIOFUEL TARGET
The European Commission, which has planned a compulsory biofuel target of 10 percent of all vehicle fuels by 2020, says the use is set at a level that will not stop the bloc's farmers from growing crops for food.
"I would refute any idea that we are not taking food concerns seriously. Agriculture has to be kept diversified, we are very very conscious of the need to have a certain level of food security in Europe," said Michael Mann, spokesman for EU Agriculture Commissioner Mariann Fischer Boel.
European industry officials said there was room for both.
"The European Union could produce around 10 to 11 million tons of ****seed oil, of which three tons at least would be for food, leaving eight million for fuel," said European Biofuels Board's Secretary General Raffaello Garofalo.
But industry analysts in Malaysia said they were already seeing a slowing in demand for palm oil from the food sector.
"It is already having an impact on the exports if you look at the data in the last two months," said a Singapore-based industry official.
Exports of Malaysian palm oil products in December fell almost 13 percent to 1,183,780 tons shipped in November, according to Societe Generale de Surveillance.
Malaysia has approved 75 biodiesel manufacturing projects so far. Plans by neighboring Indonesia are equally bullish with top industry players like Wilmar International Holdings and Chinese oil major CNOOC eyeing facilities.
($1 = 3.5 ringgit)
(one ton crude oil = 7 barrels)
http://today.reuters.com/summit/summitarticle.aspx?type=summitNews&summit=GlobalBi ofuel07&storyid=2007-01-17T093626Z_01_KLR124029_RTRUKOC_0_US-BIOFUEL-SUMMIT-FOOD.xml&src=011707_0908_FEATURES_reuters_global_b iofuel_summit
Next article:
New technology crucial to lift biofuels potential
Thu Jan 18, 2007 9:30 AM ET
http://today.reuters.com/summit/summitarticle.aspx?type=summitNews&storyID=2007-01-18T143019Z_01_L17812416_RTRUKOC_0_US-BIOFUEL-SUMMIT-SECOND-GENERATION.xml&WTmodLoc=SumArt-C2-NextArticle-1
By Naveen Thukral and Sambit Mohanty
SINGAPORE (Reuters) - Surging demand for vegetable oils and grains from the emerging biofuel sector is unlikely to create shortages for the food industry but it could take a toll on demand as prices go through the roof.
Industry experts said spiraling prices of vegetable oils against a backdrop of declining petroleum prices could weaken the competitive footing for the biofuel industry and slow expansion, freeing up availability for edible oils for the food sector.
"There is no shortage of edible oil at the moment but prices have been driven higher by this talk of biofuels," M.R. Chandran, an independent industry analyst and a former head of the Malaysian Palm Oil Association, told Reuters.
"It has already made palm oil out of reach for many people in India and China where purchasing power is less," he told the Reuters Global Biofuels Summit.
Georges Mercadal, director of Singapore-based CMS Resources, said: "I do see the potential for inflationary push because the demand for fossil fuels is going up."
Crude palm oil, the main raw material for biodiesel, now costs $554 a ton, after gaining some 40 percent in 2006. And crude petroleum is quoted around $361 a ton, down more than 34 percent from the record high of $551 in July last year.
Malaysia and Indonesia, the world's two leading palm oil producers, have set aside six million tons each from their annual output for the making of biofuel.
But industry officials said it would take a long time for that quantity to be used up because of a lack of processing capacity.
"I would think that there is enough palm oil in the world which can be used for biofuels and you could also have enough left over for the food industry," said a leading commodity trader who attended the Reuters Summit in Singapore.
In the grain market, buoyant appetite for corn for making ethanol has already lifted prices on the Chicago Board of Trade to its highest levels in a decade.
And Monte Shaw, president of the Iowa Renewable Fuels Association told the summit that demand for corn-based fuel, such as ethanol, might increase prices of the grain even further, but there would not be significant hit to the consumer.
"A 12-ounce box of cornflakes costs $2.79, but there's less than a penny's worth of corn in it. So let's say that corn goes from $2 to $4, well you've just changed the price of cornflakes from $2.79 to $2.80. Big deal," Shaw said.
Industry officials attending the summit said the United States would be able to produce enough corn in coming years to meet the domestic demand for food and ethanol, in addition to meeting its export obligations.
BIOFUEL TARGET
The European Commission, which has planned a compulsory biofuel target of 10 percent of all vehicle fuels by 2020, says the use is set at a level that will not stop the bloc's farmers from growing crops for food.
"I would refute any idea that we are not taking food concerns seriously. Agriculture has to be kept diversified, we are very very conscious of the need to have a certain level of food security in Europe," said Michael Mann, spokesman for EU Agriculture Commissioner Mariann Fischer Boel.
European industry officials said there was room for both.
"The European Union could produce around 10 to 11 million tons of ****seed oil, of which three tons at least would be for food, leaving eight million for fuel," said European Biofuels Board's Secretary General Raffaello Garofalo.
But industry analysts in Malaysia said they were already seeing a slowing in demand for palm oil from the food sector.
"It is already having an impact on the exports if you look at the data in the last two months," said a Singapore-based industry official.
Exports of Malaysian palm oil products in December fell almost 13 percent to 1,183,780 tons shipped in November, according to Societe Generale de Surveillance.
Malaysia has approved 75 biodiesel manufacturing projects so far. Plans by neighboring Indonesia are equally bullish with top industry players like Wilmar International Holdings and Chinese oil major CNOOC eyeing facilities.
($1 = 3.5 ringgit)
(one ton crude oil = 7 barrels)
http://today.reuters.com/summit/summitarticle.aspx?type=summitNews&summit=GlobalBi ofuel07&storyid=2007-01-17T093626Z_01_KLR124029_RTRUKOC_0_US-BIOFUEL-SUMMIT-FOOD.xml&src=011707_0908_FEATURES_reuters_global_b iofuel_summit
Next article:
New technology crucial to lift biofuels potential
Thu Jan 18, 2007 9:30 AM ET
http://today.reuters.com/summit/summitarticle.aspx?type=summitNews&storyID=2007-01-18T143019Z_01_L17812416_RTRUKOC_0_US-BIOFUEL-SUMMIT-SECOND-GENERATION.xml&WTmodLoc=SumArt-C2-NextArticle-1