In findings by the US Department of Agriculture (USDA), the French government is expected by 2012 to remove financial incentives for first-generation bio fuels made directly from crops like corn and wheat to meet its targets for supplying alternative forms of fuel.
The report claims that the government, in its attempt to supply seven per cent of its total transport fuel from alternate sources by 2010, will instead look to so-called second-generation biofuels to bridge demand and alleviate complaints from some in the baking sector.
These second-generation alternatives instead rely on the processing of crop bi-products like stems, leaves and husks, for fuel, which could reduce the potential impact on grain supply and prices.
Amidst a growing international focus on the potential of biofuels to offset reliance on non-renewable energy forms, fears have been raised by some food manufacturers over the impact on formulation costs.
Euro biofuel reliance
According to the USDA, recent documentation from the French grains and oilseeds board (ONIGC) suggested that a wider EU goal of supplying 10 per cent of EU renewable energy could be met from the combined use of both first and second generation biofuels.
To this end, in September of this year, France launched its first second-generation biofuel project that is targeted to reach a commercial industrial phase by 2020.
Under the name Futurol, the project focuses on the production of cellulosic ethanol from enzymatic and yeast fermentation of raw materials, the report stated.
Global commodity fears
Back in July, the American Bakers Association (ABA) called for government support to help stave off the current high prices for its products, suggesting a possible implementation on limiting bio fuels as one such means.
The ABA claims that reassessing current crop levels being used in production of bioethanol and other alternative fuels can help turnaround an eight per cent rise in overall food prices witnessed during the first half of 2008.
Lee Sanders, senior vice president of the trade group, said that it has particular concerns about the true impact of bioethanol production on the bakery industry.
"While USDA argues that only 2 to 3 percent of the increase in food prices is due to the ethanol program, many other economic, business and social organizations have strong evidence indicating that as much as 75 percent of the rise in food prices can be attributed to ethanol," said Sanders, citing World Bank figures. "Easing this mandate would provide balance between food and fuel policies which is critical."
Not all have agreed with the ABA’s views on the impact of biofuels in commodity pricing though.
In a report released back in August, financial group Rabobank said that food consumption, not biofuel demand, will remain the primary driver for commodity use in the coming years.
While the report claimed that biofuel has contributed to a recent trend of higher commodity prices, it is seen as just one of many factors driving a boon in ingredient costs.
Michael Whitehead, vice president of Rabobank’s Food and Agribusiness research unit said that growing demand and reduced output of commodities was likely to create some significant challenges, as well as benefits, for the food industry.
“[It is] Challenging in the sense that both food and non-food demand for agricultural production will continue to increase against limited resources,” he stated. “[There is promise though] as industries continue to innovate to improve factors such as yields, productivity and long-term sustainability.”