The global economic recession that started at the end of 2008 pushed investment funds and other players in the investment world closer to tangible assets, luring them back to commodities and especially to agricultural markets. Indeed, thanks to very low interest rates, weaker currencies, a commodity boom today investment in commodities is back in fashion (after many years when it played an obscure role) with the level of funds invested in commodities increasing by over 220% in the 2006-2011 period when compared to the previous five years time (2000-2005).

Meanwhile, estimates of an increasing global population, rather extreme weather patterns observed in recent years, decreasing crop yields and the extraordinary growth in global biofuels production has also focused attention on grains, sugar cane & beet, rapeseed and soy as concerns of a possible very tight supply situation might happen any time.

 Biofuels are an increasing part in this commodity world with both ethanol and biodiesel markets developing fast in the past 5-10 years. Subsidies, national compulsory blending mandates and environmental policies, pushed up biofuels demand making them one of the most profitable businesses in the renewable energy world. In 2013, global fuel ethanol demand is expected to witness an 1.3-fold increase compared with 2008 figures and should reach record high levels at almost 67 mln mt. Biodiesel demand also exploded in the past five years, recording a 1.7-fold increase in the 2007-2012 period, and is estimated to reach around 22 mln mt in 2013 (almost 2.5 times more than in 2007) expanding at a higher pace than ethanol. Furthermore, according to the IEA, world biofuels production figures in 2016 are estimated to be 28% higher than in 2010, with fuel ethanol still maintaining the largest share in the biofuels market pie (about 3.8 times higher than for biodiesel) and is expected to displace about 5.3% of total gasoline demand. Biodiesel should follow with a 1.5% displacement of global diesel demand.

 What about the future? Due to a dramatic rise in agricultural and energy price volatility based on different factors, such as rising demand, expansive monetary policy, markets liberalisation, deregulation of financial service sector in some countries, easier access to electronic market place, the profitable market player in the biofuels’ business will be the one able to better manage this volatility. Of course, the governments will continue to have an important role in supporting the biofuels development by setting higher blending mandates and encouraging new businesses. In the short term, no country can overtake the USA or Brazil as the world’s leading ethanol producers and exporters. But further investments in Asian countries, or even in Africa, might bring us some surprises in the long term, while Europe could be the cleanest gobal biofuel producer if investments in second-generation biofuel capacities continue.

Date: Tuesday, 16.07.2013, 5:00 – 6:30 PM

Location: Alte Wagenfabrik, Vogelsanger Str. 321, 50827 Cologne 

Speaker: Dr. Claudiu Covrig, Research Analyst Biofuels and Related Markets, Sucden Switzerland

Title: „Assessement of world biofuels business, production economics, trade opportunities and comparisons with conventional fuels and feedstock markets“