FocusHigh cereal prices threaten Spain biofuels

14 September 2007 17:07  [Source: ICIS news]

By Ivan Castano

 

LONDON (ICIS news)--Spain’s biofuels industry could fail to meet this year’s 1m tonne production target if the country’s cereal prices continue to soar, a trade federation source said on Friday.

 

The price of cereals used to produce biofuels has risen 40% in the past quarter, squeezing producers’ margins, although the industry has denied it is reponsible for soaring prices.

 

The hike has forced some companies - such as top producer Ebro Puleva - to idle production for several weeks.

 

“If prices continue to increase, these stops will be more frequent and could undermine our production targets for this year and some projects [factory constructions] could be delayed,” a source close to Asociacion de Productores de Energias Renovables (APPA) told ICIS news.

 

According to market researcher DBK, Spain, home to Europe’s dominant bioethanol supplier Abengoa Bioenergy, was set to double 2006 output by producing 1m tonnes of biofuels this year.

 

The industry has asked the government to intervene to lower cereal prices.

 

“We are suffering from these prices because they account for 60-70% of our manufacturing costs and we can’t pass them on to consumers,” an APPA spokesman said.

 

He added that the industry was waiting for the government to meet its request to remove tax subsidies for US biodiesel imports which have taken the market by storm and are hurting biodiesel producers.

 

APPA has also moved to silence critics who claimed the biofuels industry was responsible for rising food prices in Spain.

 

It said this had instead been caused by uneven supply and demand in raw materials, bad harvests and a sharp rise in demand from China and India.

 

Earlier this week the Organisation for Economic Cooperation and Development (OECD) raised alarms by saying the biofuels rush threatened food shortages, could damage biodiversity and would have questionable energy benefits.

By: Ivan Castano Freeman
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