European biofuels production is expanding fast enough to absorb the continent's grains and sugar surpluses, softening the impact on farmers of declining subsidies, the European Union said.
The amount of wheat and other grains used to make the alternative fuels will rise to 18.6 million metric tons by 2013, from 1.9 million tons last year, according to a report distributed on Friday in Brussels. Demand for sugar beet, used to make ethanol, will also grow, the report said. EU policies designed to promote biofuels „should lead to a significant increase in demand for agricultural commodities,” the report said.
„The expected strong expansion of bioethanol from sugar beet is expected to contribute to a stabilization of the total sugar beet area.” The EU decided in July to reduce the guaranteed price it pays for sugar by 36%, after losing a case at the World Trade Organization. The 27-nation bloc is aiming to end net sugar exports within a decade. EU regulators say biofuels can help farmers survive changes to subsidies for other products.
Increasing demand for grains from makers of biofuels may not increase prices for the crops because of shrinking demand for animal feed, the February 5 report said. More production of biofuels will also make it more attractive to grow rapeseed, used to make biodiesel. Rapeseed oil prices „are bound to increase further,” the report said. (Bloomberg)