Crops for food or fuel? The Hungarian farmer's dilemna

29-02-2008

In Hungary farmers face a dilemna over whether to grow crops for food or fuel. A recent study by the OECD suggest food prices could rise by between 20 and 50 percent as a result of the development of the bio-energy industry. For example corn is a raw material for bio-ethanol, an additive to petrol, and if demand by bio-energy plants raises demand, prices for corn as fodder will increase, again resulting in higher food prices. It's a global trend and especially important for countries like Hungary where agricultural is an important part of the economy. Our reporter in Budapest, Sándor Laczkó, has been following the debate.

As of late last summer, Hungarian consumers were getting a taste of higher-than-average food price increases - like 17 per cent in the case of bread or 18 per cent for poultry. This time, the phenomenon was due to extreme weather conditions and the subsequent poor crop but it may well be something people all over the world will have to get used to in the next decade or so. This is because the production of crops for food is coming into conflict with the production of crops for so-called bio-fuels. Sugar cane, rapeseed, sunflower and other oil seeds are in demand for the bio-energy industry. And out on the great Hungarian Plain farmers are facing a dilemma – to grow crops for food or fuel.

Márton Szabó of the Budapest-based Kopint-Tárki Research Institute believes there are more arguments against the production of bio-fuels than supporting it.

“The ‘for’-s are the high prices for cereal producers, but cereal producers are just one part of Hungarian agriculture, and the second potential advantage could be some more security in energy supply, but it’s negligible. The ‘against’-s are the high fodder prices for livestock growers, animal farmers. Also, the environmental aspects – at least neutral. Actually, it requires much subsidies, and there is a danger that much taxpayers’ money – in form of subsidies – will be invested into huge plants, which cannot actually be utilised in 5-10 years from now. And generally higher cereal process - also built into pork and animal product prices – result in higher consumer prices, retail prices.”

Márton Szabó is also of the view that all this may distort the structure of agricultural production. However, László Zsemberi, the CEO of the Swedish-owned bio-energy company SEKAB Hungary does not agree.

“Currently, the agricultural sector is quite well set in Hungary. And there is a problem that there is a surplus if there is no serious drought what happened last year. If in this year, 8-9 or 10 million tonnes of corn will be produced, then, the Hungarian Ministry and the Hungarian government will be in a big trouble of what to do with it.”

László Zsemberi says the solution to this problem can be bio-fuel production – especially as EU subsidies will decrease as of 2009. He says the surplus should be dealt with in Hungary because of benefits in transport costs and the by-products of bio-fuel.

“If we are not able to cross the borders with that corn, it is much better to have a higher value added product out of that corn, which is the bio-ethanol as the volume is reduced to one third. We shall have only one third of the logistics problem with the ethanol and the value is higher. Certainly, Hungarian agriculture could support various other renewable energies, as well. For example, the bio-diesel from rapeseed or in the second generation: the sunflower. But at the same time, we should not forget that all these cultivations are resulting in millions and millions of tons of waste: cellulosic waste like straw, corn staw, etc. That creates an even much bigger renewable energy source as a feedstock and that feedstock could support megawatts and megawatts of power production or heat production.”

So, there are plenty of arguments for and against the production of bio-fuels. Only time will tell how much it will change the type of crops grown in Hungary and the prices paid here, in the supermarket, for food. It seems certain that European Union and state subsidies will certainly have an impact on what happens.

29-02-2008