World biofuels use to grow but subsidy needed: OECD

Very few countries have enough raw material available at present to produce biofuels that could compete on price with fossil fuels without government subsidies, a major agricultural study said on Tuesday.
"In only very few countries is the required feedstock available at prices that would presently allow ethanol and biodiesel production to be competitive with transport fuels from crude oil without government support," it said.
"But such support can also create market distortions, the nature and level of which need to be well understood before policies are put in place," said the study, authored jointly by the Organisation for Economic Co-operation and Development (OECD) and the United Nations' Food and Agriculture Organisation (FAO). And although it forecast an acceleration in world biofuel usage over the next 10 years that would raise demand for maize, wheat, oilseeds and sugar, the trade-offs between food/feed and non-food uses for specific crop sectors were still unclear.
This included changes in the preferred farm-based feedstock used to make biofuels to non-agricultural products such as cellulosic fibres and waste materials, the OECD-FAO study said.
The study, relating to world argicultural markets from 2006 to 2015, assumed "very strong growth" in ethanol production in Brazil, Canada and the United States, but does not make any comment on likely developments in the European Union since the bloc's biofuels directive was not yet into force.
"With a sustained increase in oil prices since 2004, demand for biofuels is increasing strongly and is likely to accelerate in coming years," it said.
In the United States, expanding maize-based ethanol production would limit increases in maize exports, it said. But in Brazil, the world's leading producer of sugar and cane-based ethanol, there was unlikely to be any constraint on the sugar sector due to more cane being diverted into biofuel.
"Despite strong growth in Brazil's sugarcane-based ethanol sector, it is not expected to prevent it from increasing its world sugar market share," it said. "Developments ... are not expected to unduly constrain sugar production and exports to 2015," the study said.