the impact of biofuels on the world fertilizer market - … impact of biofuels on the world...
Post on 12-Mar-2018
218 Views
Preview:
TRANSCRIPT
The impact of biofuels on the world fertilizer
market
By Oliver Hatfield, Director
Integer Research Ltd
TFI Conference, November 2007
Presentation overview
• Definitions and scope
• Factors which translate biofuel market
developments into fertilizer demand
• Recent global biofuel developments and
forecast
• The impact on fertilizer demand
Definitions and scope
Some definitions
• Biofuel – renewable crops used for
transportation
• Technology
• 1G – Bioethanol (sugar and starch-based)
and Biodiesel (vegetable oils)
• 2G (cellulosic, etc) - 5-10 years away
Transport fuel share of global energy consumption,total = 7.8 billion toe
Industry
27%
Commercial
& Residential38%
Non-energy*
9%
Transport
26%
*Non-energy uses primarily include fossil fuels used for petrochemicals
** Here electricity includes only non-fossil fuel sources such as hydro, nuclear energy, solar or geothermal
Fossil Fuels
97.5%
Biofuels
1.4%
Electricity**
1.1%
Source: IEA
Global farming industry energy production breakdown for 2006
Cereals63%
Oil Crops9%
Sugar Crops7%
Roots & Tubers6%
Others*6%
Fish, Meat and Animal Products
10%
Potential Feedstocks
for First Generation
Biofuels Technologies
Food & Beverage
62%
Livestock Feed
29%
Biofuels4%
Industry3%
Other**2%
* Pulses, vegetables, fruit, nuts etc.
** Seed production, processing losses, transportation losses, etc.
1100 Mtoe 1100 Mtoe
Source: FAO
Factors which translate biofuel in to fertilizer
demand
What factors translate biofuel market
developments into fertilizer demand?
Fertilizer
use for
biofuel
Fertilizer
app. rate
Crop
yield and
land
required
Raw
material
crop
required
Biofuel
output by
crop
Gov’t
mandated
targets
Political
Economic
- profit
incentive
Environ-
mental
factors
Oil priceCrop
price
Subsidy
required
Political drivers
• Energy security, diversity of sources, reduced
dependence
• Employment and industrial development
• Agricultural support
- Higher crop prices = happy farmers
Environmental drivers
• In general, CO2 saving with intensification
• Expansion of land = ?
Source: IEA, various
Economic drivers – rising oil pricesBrent crude oil, US$/TOE, $ of the day
0
100
200
300
400
500
600
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Source: DOE
Relatively stable crop prices, until 2006
0
20
40
60
80
100
120
140
160
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Rela
tive
Price
, 1
99
1 =
10
0
US - Maize Malaysia - Palm Oil EU - Wheat
Source: USDA, World Bank
Feedstock sensitivity analysis for
biodiesel cost of production vs. fossil diesel
Crude Oil: US$ 33 / bbl
Palm Oil: US$ 222 / ton
Soybean Oil: US$ 270 / ton
Rapeseed Oil: US$ 397 / ton
Crude Oil: US$ 98 / bbl
Palm Oil: US$ 667 / ton
Soybean Oil: US$ 810 / ton
Rapeseed Oil: US$ 1190 / ton
Source: Integer
Feedstock sensitivity analysis for
bioethanol cost of production vs. gasoline
Crude Oil: US$ 33 / bbl
Sugar Cane: US$ 9 / ton
Maize: US$ 61 / ton
Wheat: US$ 80 / ton
Crude Oil: US$ 98 / bbl
Sugar Cane: US$ 26 / ton
Maize: US$ 183 / ton
Wheat: US$ 239 / ton
Source: Integer
Projection of biofuel production
• Forecast fuel consumption
• National/regional targets: are these targets
achievable given economics, politics etc?
• % share of biofuel of total transport fuel
consumption
• Biofuel production forecast:
• By region, by fuel
Biofuel raw material crop requirements
• Biofuel capacity/production by crop
• US – ethanol from corn, diesel from
soybeans
• Brazil – ethanol from sugar, diesel from
soybeans
• Europe – ethanol from cereals, diesel from
rapeseed
Land requirements and fertilizer consumption
• Crop production/yield = land use by crop
• Fertilizer application rate x land use by crop =
biofuel related fertilizer consumption
Recent global biofuel developments and forecast
Biofuel production split – bioethanol & biodiesel
Source: Integer
Biofuel production split, by region
Source: Integer
Biofuel production forecast – total by region
Source: Integer
0
10
20
30
40
50
60
70
80
90
Bio
fuel P
rod
uct
ion
, Mto
e
US Brazil EU SEA ROW Downside Upside
0
2000
4000
6000
8000
10000
12000
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Eurostat, Integer
EU –targets elusive, but still major impact on land useBiofuel planted area (thousand hectares)
USA – biofuel demand taking over cornCorn use for ethanol as % of total corn production
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: USDA, Integer
Brazilian biofuel area continuing to expand –
strong fundamentals, mature marketPlanted area (million hectares)
0
1
2
3
4
5
6
7
8
9
Source: Dept of Agriculture, Brazil; Integer
Rest of the World
• Indonesia and Malaysia – oil palm growth and
strong potential
• But doubts over exports, recent economics
unfavourable, no subsidies
• Rest of the world
• Developing - lower on political agenda than food
security
• Developed- many schemes and targets, but
compared to ‘big 3’, biofuels potential is much smaller
Impact on fertilizers
Measuring the biofuels effect on fertilizers
• Factors to consider:
- Impact overall: change in world fertilizer consumption as
a result of crop production related to biofuel
- Change in fertilizer consumption at country/region level
in biofuel producing/consuming countries
- Changes in other countries/regions affected indirectly –
increased fertilizer use as a result of shifting crop patterns,
supply gaps, higher crop prices
Base case: N, P and K fertilizer consumption on
crops used to produce biofuels(thousand tonnes nutrient)
0
1000
2000
3000
4000
5000
6000
7000
2006 2007 2008 2009 2010 2011 2012
USA EU-27 Brazil SE Asia Rest of the world
Source: Integer, FAO, USDA, ANDA, IFA
The relative impact of biofuels growth
• Assuming non-biofuel fertilizer demand increases by a
straight line 2.5% per year to 2012:
• Increase in nitrogen demand for biofuels 7% of total
increase (biofuels + non-biofuels)
• Increase in phosphate demand for biofuels 8% of
total increase
• Increase in potash demand for biofuels 15% of total
increase
What is happening at a country/region level
• Growth in nitrogen in US for corn, at the expense of
soybeans (low N)
• In the EU:
• Switch to rapeseed in Europe, biggest increase in
nitrogen
• Expansion of area – reduction of set aside
• Growth in sugar cane in Brazil, some expansion of
soyabeans for diesel, more so to compensate for lower
US production
Knock-on effect on other countries/regions
• EU/US area is constrained such that productivity increases
are insufficient to supply new biofuels market demand
• Impact of biofuels on crop markets:
• Lower US corn availability for export
• Lower US soyabeans availability
• Lower EU cereals crop availability
• Reflected in higher cereal/oilseed prices
• Positive impact on countries with potential for intensification
(dormant crop yields, immature fertilizer use)
• And potential for land expansion – Brazil
Summary and conclusions
Summary and conclusions
• The relationship between land and energy is now
strongly established
• Technological lock in, sunk investments, political
commitments
• Winners – land owners, farmers, input suppliers
• Losers – crop consumers, tax payers?
• Biofuels and renewable energy are high on the political
agenda, even though 1G economics are questionable
Summary and conclusions
• Biofuels will continue to exert significant positive
influence on the fertilizer industry:
• Across all nutrients
• In biofuel producing/consuming countries
• In countries with intensification/expansion potential
for filling crop supply gaps
• But, key point to watch
• Longer term growth rate subject to swings in energy
and crop prices, and political decision making
top related