A wave of yellow has blanketed Europe’s farmlands
The total surface area of farmland planted with rapeseed in France has risen by 51 percent over a period of five years, reaching 1.5 million hectares in 2007. Growth has been even stronger in Ukraine, where in the space of just three years, what once was just a few thousand hectares of rapeseed has expanded to almost one million!
This annual with yellow flowers has traditionally been grown for food purposes, primarily for production of the oil extracted from its seeds. Because the plant’s extraction residues, or oil cakes, are so rich in protein, these co-products can also be optimized for use in animal feed.
The main driver behind this boom in rapeseed nonetheless lies elsewhere. The craze for rapeseed can be traced more specifically to new industrial opportunities. First in line is the production of biodiesel, one of the two largest “first-generation” agrofuel subgroups, along with ethanol. The market for biodiesel is particularly profitable in Europe; over 50 percent of all automobiles are equipped with diesel motors, and the European Union has raised its goal for the consumption of agrofuels to ten percent by 2020.
In France, more land is now dedicated to energy crops than to food oils and exports. France’s agrofuel factories guarantee secure business opportunities for farmers, who should stand firm, at least in the short term, given the favorable economic and tax conditions for plant-based fuels. In Ukraine, production is almost exclusively intended for exports; rapeseed grown there is supplying the biodiesel factories in Ukraine’s neighboring European countries and Germany in particular, which despite being the second leading producer in Europe, after France, has been unable to meet its domestic demand.
A tide that nonetheless has already shown signs of receding
The trend has already started to slow. The recent surge in grain prices is leading farmers to abandon oil crops for wheat or barley. These grains should soon benefit from a push by the European Union to reduce the portion of land farmers are required to let lie fallow. With more land available to cultivate grain, which is particularly profitable at present, farmers will most likely plant these grains, rather than rapeseed grown for fuel purposes (as has been the case up until now) on the imposed ten percent portion of their farmland that the Common Agricultural Policy requires be set aside.
Rapeseed is furthermore expected to face increased competition over the next few years. In Brazil and Argentina, for example, the soy industry, which already dominates the animal feed market, is currently investing in biodiesel production as a strategy for the European market. At the same time, second-generation agrofuels have already started to emerge and the array of raw materials used for their production is diversifying. This diversification will most likely favor crops grown specifically for use in energy production or co-products from other, more profitable systems that also represent fewer constraints than rapeseed.1 …
All of these factors – technological, economic and political – constitute contradictory signals on the market, pointing to quite tense conditions in the middle and long term for fuel-based and food-based rapeseed production, which in turn will certainly translate into high price volatility.
|