Australian grain: big boost seen from ethanol demand

Biofuel is emerging as a major driving force in Australia's grains industry now that the big car makers have thrown their weight behind idea of blending ethanol with petrol.
Ford, Toyota, Mitsubishi and General Motors-Hoyden last week responded to pressure from the federal government to label their locally built cars as compatible with using a fuel with a 10 percent ethanol blend.
This would go a long way toward removing consumer opposition to ethanol, although whether the international oil giants would agree to blend ethanol with their petrol was still unclear.
"There are no other industry development options on the horizon related to agriculture that hold so much promise," said Murray Jones, president of the Grains Council of Australia.
Australia's grains industry is beginning to calculate how much extra grain will be required to produce ethanol fuel, and how much wheat might be diverted from export markets.
With one tonne of grain required producing around 400 litres of ethanol, Australia's target of 350 million litres of ethanol fuel would require around 450,000 tonnes of grain, if grain and sugarcane each take half of the feedstock market, David Gin were, chief operating officer of the Grains Council, calculated.
An Industry Minister spokeswoman told Reuters this week that the government now expects to reach the goal of producing 350 million litres a year well before the target date of 2010.
The extra demand for ethanol is likely to require an extra 900,000 to 1 million tonnes a year of grain by 2010, according to Ginns. Australia's current grain production is around 34 million tonnes a year, with wheat accounting for 24 million tonnes.
Lyndon Pfeiffer, grains president of the Queensland farmers organisation known as AgForce, said his organisation believed 1 billion litres of ethanol fuel would be consumed by 2010.
"That's still quite achievable without any threat of running out of grain for the intensive livestock industry and grain used for human consumption," he said.
Pfeiffer said AWB Ltd, Australia's monopoly wheat exporter, already sees tough competition for ASW style wheat from low-cost producers in the Black Sea region and South America.
"A lot of that wheat could very well go into ethanol production," he said. Queensland irrigators were also looking at diversifying from cotton into grain sorghum, another feedstock for ethanol.