Driven by the new energy policy of the US government the American ethanol production will reach 30 billion gallons in 2012. The current annual turnover could rise from 14 to 20 billion dollars at a time when the price of crude back to overcome the share of the $ 70 per barrel.
A recently conducted by the Center for Agricultural and Rural Development at Iowa State University (ISU), however, the study also makes the point about the possible economic consequences on the American market of wheat compare with the rising production of biofuel ethanol.
According to the report the growth of ethanol production will drag upward even the price of wheat by $ 2 per bushel in 2006 to $ 4.42 by 2016. In a crisis, such as that recorded in 1988, the prices of soybeans and wheat could however, further increase of up to $ 8.50, causing a drop of 50% on exports of wheat and related products.
The biofuels industry could come then to consume more than half of US wheat, indirectly driving up prices for livestock feed and then the meat to the final consumer. In the next ten years it is therefore assumed a reduction in exports of grain and meat made in the USA and an increase in imports from the southern hemisphere.
Despite the hypothesis may seem negative against biofuels study aims to identify an ‘optimal gear’ in the growth of the biofuel industry to take account of general economic analysis and not only partially. In this regard, the report summarizes the average ask yourself three short-term goals:
– Secure as a production peak max. ethanol an annual volume of 14 billion to 15 billion gallons and a cover of 10% of current US gasoline consumption. This step would ensure grain prices constantly lower than the $ 3.16 per bushel.
– The study also suggests the introduction of a subsidy of $ 270 for each acre converted for the cultivation of wheat and wheat, in order to contain the impact of ethanol on the agri-food sector.
Diversify the production of biofuels. The possibilities offered by the sector are manifold, but investment and policy decisions are often hampered by economic interests of large producers of grain policy and the importance of States ‘ barn ‘ (in the US).
– Apply the Conservation Reserve Program (CRP) to contain the uncontrolled expansion and give out financial aid and support to activities damaged by the increase in wheat (breeding).
In conclusion. ISU study confirms the rapid growth forecast for the biofuel industry in the US, however, taking into account the criticism raised by several parties on the impact of biofuel could be in the food industry.
Compared to the other criticisms of the biofuel study it appears to be free from political motivations and indicates the possible optimal solutions to reconcile the birth/growth of the biofuel industry to the rest of the agricultural economy.