29 August 2006

Non-food crops offer growing options

Much has been made of hopes for new markets in bio-energy crops.

This is an exciting development for farmers, not least as it opens the concept of diversification for producers who previously thought it wasn’t an option for their businesses.

While bio-energy is very much in focus at the moment, the non-food crop market offers wider options for farmers to consider.

Moving into this market does not necessarily involve great capital expenditure as many options utilise existing farm kit. However, it will involve the undertaking of research and contracts for the sale of the crop – again an advantage for the business. The use of existing skills, limiting of capital expenditure and in-depth market research are the main precursors of any successful diversification enterprise.

The National Non-Food Crops Centre breaks down the opportunities for non-food crops into five different product areas – fibre, carbohydrate, energy, oil and speciality.

Energy crops are currently in focus and the easiest for farmers to consider. With more than 20 companies offering contracts, there is plenty of guidance in the marketplace.

The Government has undertaken to produce 10% of the UK’s energy from renewable sources by 2010 and a further 10% by 2020. Some of this could be achieved from more traditional renewable sources, such as hydro-electric or wind power, but utilising crop sources is a serious option.

It is particularly attractive for energy generators looking to utilise existing power stations and co-firing these with renewable energy sources.

The immediate choices for supply of biomass are short rotation coppice such as willow or poplar and herbaceous material such as miscanthus. However, biomass can include forestry residues, animal wastes and agricultural crop residues.

As with commodities, farmers must consider the opportunities for adding value. Pelleting of herbaceous material can not only ease handling but also offer opportunities in additional markets – such as domestic heating.

Opportunities for biofuels are also receiving a high profile. Bio-diesel is derived principally from the esterification of oilseed rape, or from waste products such as waste cooking oil or animal fats. Rapeseed has many advantages for use as a mix with normal diesel – the main one being that no engine modification is required.

However there are challenges – principally the cost. Current prices for rapeseed oil are around $838 per tonne, compared to $498/t for soya oil and $450/t for palm oil.

A further restriction would be the logistics of supplying sufficient commodity for the UK market. To meet 5% of UK fuel diesel requirements would require an additional 800,000 hectares of oilseed rape in Britain.

Similarly an extra 400,000 hectares of wheat would be needed to produce bioethanol as a petrol additive or substitute to meet 5% of UK petrol requirements. Current contracts in the market for the next two years offer prices similar to those in the wheat futures market.

While oilseed rape dominates the oil market in the UK, novel crops such as crambe (Abyssinian mustard) are becoming more established. These oils can be used in a wide range of industries including plastics. As mineral oils become more expensive, substitution or supplementation becomes a real option.

The UK carbohydrate or starch industry might also rely heavily on wheat crops in the future. UK starch output is currently 750,000 tonnes, 75% of which is from imported maize that could be replaced from within the UK.

Fibre products offer some of the most exciting new opportunities. Hemp and other fibre crops feature in a variety of markets such as matting products. There is potential for further development in the pulping sector, as insulation, and as composites in the motor industry.

The opportunities within the pharmaceutical markets are perhaps more limited – although no less exciting. The pharmaceutical industry uses plant materials for active ingredients, such as morphine extraction from poppies.

As with any business diversification, it is important to go into any project well informed, with clear and robust market and business plans.

After getting those right, remember non-food crops have the added advantage for farmers, which is that they are, after all, just another crop!

This long-term view and commitment is something our dedicated agricultural managers share and understand.

If you would like to discuss our support for your business then give Martin Doyle NatWest’s regional agricultural manager for Wales a call on 01686 628603.

Source: icWales Aug. 29, 2006.

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