Australia's grains industry is likely to see increased production in the years ahead to feed a new ethanol industry which will chew up hundreds of thousands tonnes a year of wheat and sorghum as feedstock for the fuel.
Industry leaders see a special place for the growing of wheat for ethanol production. They do not believe it would divert tonnages from exports, which presently amount to the second largest in the world. "There's certainly a huge amount of interest in the grains community," said David Gins, chief operating officer of Grains Council of Australia, which represents the majority of Australia's 60,000-plus grain growers. A week ago, Australian Prime Minister John Howard said he would work with the oil majors to push toward target consumption of 350 million litres of ethanol fuel a year by 2010.
This stopped short of the sugar industry's call for the government to pass legislation requiring oil companies to blend ethanol with petrol, thereby creating huge new demand for sugarcane, grains and biomes as feedstock.
But Howard's move does push Australia much closer than before to the creation of an ethanol fuel industry, and will boost demand for agricultural feedstock, including grains.
Target production of 350 million litres of ethanol fuel by 2010 will require between 450,000 tonnes and almost 500,000 tonnes of grains as feedstock, according to various industry estimates.
"I think it will happen," Ginns said of the prospects of an ethanol fuel industry getting off the ground and requiring that amount of agricultural feedstock.
The government target of 350 million litres of ethanol represents only around 1 percent of Australia's total fuel consumption. GCA sees this as conservative and estimates that 5 percent of Australia's fuel will be produced by ethanol by 2018, with 20 percent of that from grains, 30 to 40 percent from sugar and the rest from biomes.
Yields for grain produced for ethanol production will be higher than those grown for milling because of their high starch content, instead of protein.
"Once we start to get those varieties out and being grown, farmers are going to see per-hectare yield increase, the cost of production decrease because they don't have to grow cereals for protein, their margin per hectare will increase, and that will lead to greater total grain availability," Ginns said.
Ginns believes that five years from now, the 350 million litres of ethanol in the government's target projection will be produced around 60 percent from sugar and 40 percent from grain.
But with opinion polls showing that over 20 percent of Australian motorists would buy blended fuel immediately if they could, Ginns believes that demand for ethanol will be well over 350 million litres by 2010.