Memorandum submitted by Food and Drink
Federation (Bio 15)
With the UK and EU bio-energy sectors going
through such a rapid period of change and expansion, the Food
and Drink Federation (FDF) considers that the Environment, Food
and Rural Affairs (EFRA) Select Committee's investigation into
the role of renewable energy in meeting the UK's climate change
objectives is timely.
FDF represents companies with a wide variety
of interests in the bio-energy debate—some are producing
bio-fuels and others procure large volumes of agricultural raw
materials that can be used in bio-energy production. For this
reason, FDF does not wish to make detailed comments on the questions
the Committee is considering at this time. Our members are however
concerned that financial incentives aimed at encouraging the development
of the bio-energy sector may indirectly disrupt agricultural commodity
markets and lead to raw material supply shortages and price increases
for domestic food manufacturers. Given this link between the food
and biofuels industries, FDF members believe that that any cost-benefit
analysis of the bio-energy sector will need to consider both the
direct and indirect consequences of its development. In particular
the Government must take the food and drink manufacturing industry's
interests into account—and consider any knock-on effects
into food production—when formulating new bio-energy policies.
Our views on this matter are spelt out in more detail in the attached
Position Statement and paper on developments in liquid oil prices.
Director General
BIOFUELS POLICIES
AND THEIR
IMPACT ON
THE UK FOOD
MANUFACTURING INDUSTRY
FDF position statement
1. FDF members support the overall EU and
UK commitment to promote renewable energy sources as a contributor
to long-term sustainable growth.
2. As part of this commitment, the EU is
encouraging member states to produce biofuels. In order to stimulate
their production at the national level, many EU member states
have introduced financial incentives to encourage producers to
sell their production into the biofuels industry. FDF members
are concerned that such policies may have unintended negative
consequences for UK food manufacturers. In particular, they may
limit the supply of raw materials available for domestic food
production.
3. UK food manufacturers are particularly
concerned about the impact that biofuels policies may have on
the food industry's supply of rapeseed oil which is a key ingredient
in margarine, spreads, mayonnaise and salad cream. We would encourage
the Commission to recommend that the European Committee for Standardisation
change the current iodine rules to make more oils eligible for
biofuels production. This would help reduce the pressure on the
domestic supply of rapeseed oil. UK Government statistics indicate
that there is less likely to be a similar medium term cereals
supply issue, given the current volume of cereal exports and production
capability. However, some cereal processors have medium term concerns
about the potential impact that biofuels policies may have on
the domestic wheat supply. FDF members believe that the Commission
should remove policy instruments, such as the current set-aside
obligations, which prevent EU farmers from producing more arable
crops for human consumption in response to market signals. Import
tariffs should also be reduced to enable more arable crops to
enter the EU market.
4. Given the link between the food and biofuels
industries, FDF members believe that the European Commission and
the UK Government must consider the food industry when formulating
new biofuels policies. Regulatory impact assessments should be
conducted before any new policy is introduced and these should
include sections which examine the potential consequences for
domestic food manufacturers, both in terms of their food production,
co-products production and the energy they use. Decision-makers
should also ensure that the food industry is given the opportunity
to comment on any draft legislation that may impact upon the supply
and price of agricultural raw materials.
Food and Drink Federation (FDF)
February 2006
Annex
Market situation for rapeseed oil
— "Higher biofuel production should
further stimulate world commodity prices, but with the exception
of sugar, vegetable oils and oilseed meals, the impact of the
additional biofuel production is relatively small: 0.6% to 2.8%
by 2014 on top of the impact through higher production costs in
agriculture." OECD—23 January 2006.
— "Demand for rape oil within
the EU in 2005-06 will rise by 26% in order to supply the burgeoning
EU biofuel industry, according to the latest figures from German
oilseeds analyst Oil World. High demand for biofuels in the EU
and rising prices could `contribute to a decline by 0.1 million
tonnes in rape oil consumption in the food sector in October/September
2005-06', the report said." Agra Europe—12 October
2005.
— "Robust rapeseed and rape oil
demand growth in prospect for 2005-06: Rape oil demand to increase
over 1.1 Mn T after almost 1.5 Mn T this season, owing to biodiesel."
Oil World—October 2005.
— "According to our estimates,
rape oil demand in the EU-25 for non-food use has soared to 2.65
Mn T in October-September 2004-05, more than doubling within three
years. The European rape oil demand shaping up for 2005-06 will
presumably turn the EU into a net importer of rapeseed and/or
rape oil." Oil World—September 2005.
|
