Funcionamiento de la Obra Social

Farmers’ income is another important consideration for EU policy-makers, therefore it is important to understand the order of magnitude of farmers’ sales of feedstocks to the EU biofuel industry.

The previous section on costs to consumers of agricultural commodities and food describes the data limitations. The same caveats apply to the case of estimating EU farmers’ income from selling feedstock to the biofuel industry. As discussed above, biofuel policies have impacts on the prices of commodities far beyond the immediate biofuel feedstocks through to a range of second-tier effects. However, these effects in their entirety can only be modelled

33 _{http://www.epure.org/producing-members} 34 _{http://www.ebb-eu.org/members.php}

35 _{Websites: http://www.registroimprese.it/ and http://www.axesor.es/} 36 _{Institut National de la Propriete Industrielle-INPI. Website: http://www.inpi.fr}

37 _{Cristal Union (2012).Cristal Union, France. Retrieved from: http://www.cristal-union.fr/wp-content/flippingbook/rapport-annuel-2011/}

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with varying degrees of approximating the reality. A further caveat is that if agricultural commodity prices rise in the long run increasing farming profitability, this is likely to result in increased land values, which would erode this benefit to those farmers who lease land.

A quantification exercise below focuses just on the key biofuel feedstock, vegetable oils, wheat, maize, barley and sugar beet. Importantly, not all feedstocks used for biofuel production in the European Union originate from the EU; a lot of feedstock is imported. Due to data constraints, the ultimate origin of feedstock has again to be modelled, and the latest estimate of this type is available for 2008 (see Tables 22 and 23).

TABLE 22: ULTIMATE ORIGIN OF FEEDSTOCK FOR BIODIESEL CONSUMED IN THE EUROPEAN UNION IN 2008, EXPRESSED IN VOLUME OF BIODIESEL (KTOE).

RAPESEED OIL SOYBEAN OIL PALM OIL SUNFLOWER OIL TALLOW RECYCLED VEGETABLE OIL TOTAL

European Union 3,233 82 14 124 212 235 3,900 Canada 122 18 4 6 149 Ukraine 252 10 261 United States 13 528 133 673 Argentina 4 238 242 Brazil 342 343 Indonesia 624 624 Malaysia 414 414 Other 111 52 164 Total 3,734 1,269 1,053 124 348 241 6,770

Source: Ecofys et al. (2011), p. 42.

TABLE 23: ULTIMATE ORIGIN OF FEEDSTOCK FOR BIOETHANOL CONSUMED IN THE EUROPEAN UNION IN 2008, EXPRESSED IN VOLUME OF BIOETHANOL (KTOE).

WHEAT MAIZE BARLEY RYE TRITICALE SUGAR BEET WINE SUGAR CANE OTHER TOTAL

European Union 373 207 20 51 7 427 148 149 1,381 United States 2 3 Norway 2 2 Ukraine 1 1 3 Argentina 12 5 17 Brazil 6 289 296 Pakistan 33 33 Bolivia 19 19 El Salvador 13 13 Peru 13 13 Egypt 14 14 Guatemala 11 11 Costa Rica 10 10 South Africa 2 2 Other 2 1 4 Total 381 228 20 51 7 428 148 411 149 1,822

Combining the data of Tables 22 and 23 on the ultimate origin of feedstock, data on feedstock prices from Eurostat and FAOstat, and estimates of feedstock consumption for biofuels production in the European Union from Table 19 and the AGLINK-COSIMO model (as published in European Commission, DG AGRI, 2011), it is possible to estimate the value of feedstock sales by the EU farmers to the EU biofuel industry in 2011, as summarized in Table 24. TABLE 24: ESTIMATED ANNUAL VALUE OF EU FARMERS’ SALES OF SELECTED CROP FEEDSTOCKS TO THE EU BIOFUEL INDUSTRY IN 2010–2011.

BIODIESEL

FEEDSTOCKS ETHANOL FEEDSTOCKS

VEGETABLE OILS WHEAT SUGAR BEET MAIZE BARLEY

Physical volume of feedstock used for biofuel production in the EU, million tonnes (vegetable oils – based on FEDIOL 2012, other feedstocks – based on European Commission, DG AGRI, 2011)

~ 7.7 4.3 – 4.8 18.2 – 20.6 3.3 – 3.8 0.6 – 0.7 Share of EU-grown feedstock in total

feedstock for biodiesel in the EU (latest estimate available for 2008, based on Ecofys et al. (2011)

56% 98% 100% 91% 100%

Average feedstock price per tonnes, EUR (weighted averages based on OECD/FAO,

2012, Eurostat and FAOstat data) ~ 800 – 1,000

~ 120 –

160 ~ 30 ~ 160 – 210 ~ 130 – 180 Estimated value of the EU farmers’ sales of

crop feedstock to the biofuel industry, billion

EUR 3.5 – 4.5 ~ 0.6 – 0.8 ~ 0.6 – 0.8 ~ 0.6 – 0.7 ~ 0.1

Estimated value of the imports of biofuel

feedstocks in the EU, billion EUR 3 – 4 ~ 0 ~ 0 ~ 0.1 ~ 0

Source: IISD-GSI data compilation and calculations based on FEDIOL 2012, European Commission, DG AGRI 2011, OECD/FAO 2012, Eurostat, FAOstat and Ecofys et al. (2011).

In total, the annual value of biofuel feedstocks’ sales by the EU farmers to the EU biofuel industry can be estimated at EUR 3.5 – 4.5 billion for biodiesel and EUR 2.5 – 3.5 billion for ethanol over 2010-2011.39 _{These values can be seen}

as direct cash flows to the EU farmers linked to the EU biofuel policies. In the meantime, it is important to underscore that if the farmers were not growing biofuel feedstocks, they would be still growing and selling some other crops, even the same ones, but for other uses (e.g., corn for exports rather than ethanol production).

Further, it has been argued that farmers growing biofuel feedstocks benefit from the longer-term nature of supply contracts with the biofuel industry (FAO, 2008, p. 83), which in certain cases may have reduced the volatility of the prices at which feedstocks are sold to the industry, creating a more certain business environment for farmers. On top of this, the EU farmers also benefit from higher prices for all crops they sell for all uses as the agricultural commodities’ prices are driven upwards by biofuel policies as described above.

In the meantime, the impacts of biofuel policies on farmers’ incomes are not limited to the revenue gained from feedstock sales. In terms of boosting farmers’ incomes, it has been argued that feedstock producers may be receiving a better price when selling to a local biofuel facility than if they were selling their feedstock to some other buyer at

a greater distance thanks to a significant reduction in transport costs (Swenson, 2006). However, for those farmers who lease their land rather than own it, the capitalization of biofuel subsidies in the value of land may have resulted in higher lease rates and thus additional costs (Swenson, 2006).

What would happen to EU farmers’ income if biofuel market support were removed in the European Union? In light of the discussion above it is possible to see that, with all things being held equal, depending on what feedstock the farmers are growing, their income would contract at least within the same ranges as ranges of the price effects described in Table 18. At a new lower equilibrium price, EU farmers would be able to supply their produce to other markets, e.g., for animal feed, both within and outside the EU. Davies (2012) simulated a removal of the current EU biofuel market support using the AGLINK-COSIMO model. According to this research, there would be negligible changes in production, area harvested and yields of the major biofuel feedstocks relative to the baseline levels (i.e., subsidized levels). Under this scenario, the EU farmers would re-orient some of their sales to external markets: e.g., wheat and vegetable oil exports from the EU would increase by 33 per cent and 20 per cent respectively through 2020. In the meantime, a comprehensive discussion of the benefits that EU farmers are reaping from policy-stimulated demand for biofuels is impossible without looking at the cost of producing biofuel feedstocks in Europe at a competitive cost in comparison with the options of importing it. EU farmers have experienced increased competition from feedstock providers from other countries, as can also be seen from Table 24. In particular, in 2008, 44 per cent of biodiesel in the European Union was produced using cheaper imported feedstock. These issues are discussed in more detail in Section 5.1.7 of the report.

Key findings

• In total, the annual value of biofuel feedstock sales by EU farmers to the EU biofuel industry can be estimated at EUR 3.5 - 4.5 billion for biodiesel and EUR 2.5 - 3.5 billion for ethanol for the calendar years 2010-2011. • Farmers growing biofuel feedstocks often benefit from longer-term supply contracts (FAO, 2008).

• Only about half, if not less, of the value of biofuel sales in the EU market went to the EU farmers growing feedstock crops.

• EU farmers have experienced increased competition from foreign feedstock providers. For example, in 2008 44 per cent of biodiesel consumed in the European Union was produced using imported feedstock.

• If biofuel market support were removed in the European Union, farmers’ revenues would likely decrease, mainly due to lower prices for agricultural commodities. But, according to the available modelling results, farmers would be able to re-orient some of their sales to external markets.