Doubts over EC cereal supply measure - producers
20 September 2007 14:57 [Source: ICIS news]
LONDON (ICIS news)--European ethanol producers are divided over the significance of the European Commission (EC) proposed scrapping of the set-aside rate for cereal farmers, it said on Thursday.
The proposal would see the set-aside rate currently at 10% of all land reduced to zero. It comes in a year that has seen cereal prices driven to all-time highs due to poor weather and strong global demand.
The set-aside rate was originally introduced 15 years ago to counter what was then a serious over-supply situation.
While some think that allowing farmers to fully cultivate their lands over the next nine months will provide much needed relief to European wheat and grain supplies others believe the impact will be minimal.
"The fruits of this measure will not be seen until [European] summertime next year" said one UK trader.
"It is too early to say whether the situation then will be as dire as it is now. Aside from this we are talking about a marginal increase in cereal production. This will not change much", the source continued.
Others were more enthusiastic about the proposal which EC regulators hope will stimulate an extra 10-17m tonnes of cereal production.
"This can only be a good thing", said one fuel ethanol producer this week.
"The feedstock situation has become unmanageable in the last few months. The EC has a responsibility to protect this industry", it added.
Wheat and grain are essential raw materials for most European ethanol producers. Sugar beet is the another common feedstock.
By: Charles Shaw
+44 20 8652 3214
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