by Rebecca Coleman, US Wheat Associates Director of Policy and Government Programs

Recent reports in the European Union (EU) trade press forecast a biofuel boom that may have a significant impact on supply and demand for grains in the EU over the next five years.

A senior analyst speaking at the Global Grains Conference in Geneva, Switzerland, this week noted that "the EU may have to adapt its market by increasing wheat production and imports and lowering exports.”

It is expected that by 2010, ethanol production in the EU will reach six million cubic meters, half of which will be produced from wheat.

Tax incentives are driving the trend, most notably in Spain, Germany and Sweden. Hungary is seeking to convert its wheat surplus into biofuel and has announced future ethanol production will increase to almost three million cubic meters from the current 80,000 cubic meters.

While milling wheat exports within the EU are likely to remain unchanged, exports outside the EU may be affected and any changes to supply and demand patterns may affect prices and trade.

The EU is a key player in global wheat trade. USW will continue to monitor and report on the situation to observe both short- and long-term effects of the biofuel situation around the world.