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PR - Changes In Agricultural Industries Bio Fuel Chains – Analyzing Structure, Options, And Impacts

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  • Dautzenberg, Kirsti
  • Hanf, Jon H.
  • Jungklaus, Sven-Oliver

Abstract

Structural change in the agricultural sector as well as in the whole agricultural value chain is an ongoing dynamic process and affords a number of diverse phenomena. The EU Strategy for Biofuels (2006) and the Biomass action plan (2005) set a clear signal that the EU wishes to establish and to support the bio energy-industry. The perceivable aim of the Common Agricultural Policy (CAP) consists in reducing food production and in enlarging the non-food production. Another driver for the attractiveness of bio-energy and bio-fuel production is the price history of crude oil and natural gas in recent years. As a result the total production of biofuels in the EU is increasing rapidly. The EU`s production of liquid biofuels (bioethanol, biodiesel) amounted to a total of 2.4 Million tonnes in 2004 (EurObserver, 2005); an increase of more than 25 % compared with the previous year. Catalysts have been the adoption of Biofuels Directive (2003/30/EC) by the EU Commission as well as the urge that member states have to ensure that in 2005 biofuels account for at least 2 % of the total used transportation fuels. In 2010 a minimum stake of 5.75 % has to be met. In 2007 German enterprises are planning to enlarge the production capacity for bioethanol production for 330.000 t/a as well as for biodiesel 1.9 Million t/a. For example, on top of the already planned capital expenditures of about € 500 million in bioethanol production the German “Südzucker Group†plans within the next years to triple the production capacity to over one million tonnes in Germany, Austria, Belgium, France and Hungary. This development leads to structural changes in the agricultural sector as well as in the whole agricultural value chain. Beside price increase of commodities the formation of vertically organized structures along the value chain can be observed in order to guarantee on the one hand production efficiency (regional supply of raw material) and on the other hand safeguarding the high investments. The aim of the paper refers to the consequences of the rapid growth of the bio-energy sector and its diverse impacts on all stages along the whole chain and the agricultural sector. As generally pointed out the production is changing from an industry which is dominated by family-based, small-scale, relatively independent firms to one of larger firms that are more tightly aligned across the production and distribution value chain. Hence the aim is to elaborate on the impact of verticalisation as a main consequence on the management of agricultural enterprises. For example, in the value chain of bioethanol there are two types in which both farms are involved. On the one hand there are the central plants which are operated by companies and on the other hand there are the distilleries and cooperative distilleries which are ran by farmers or where they have a close regional connection with. In both types farms are providing the raw material. But the conditions differ between these types. In the first type, farmers account the advantages of companies as operators. The risk is lower and the safety of payments is more ensured than in smaller enterprises. Furthermore farmers can develop long term marketing possibilities. But for big producing sites there is the need of a high amount of raw material so the market power of the single farmer is going down and because of the heterogeneous group of farmers it will remain low. The single farm is replaceable. The smaller amount of suppliers in small producing distilleries makes a straight -and partially participatory- contractual framework necessary. Additionally in this context we will elaborate on the assessment of the implications for farm incomes and the rural economy. Interviews are conducted with the managers of enterprises which produce bioethanol and biodiesel in Germany. The focus will be laid on the vertical institutional structures between agricultural enterprises and the producers of biofuels, especially on embodiment of the formal and informal contracts between farmers and biofuel producers.

Suggested Citation

  • Dautzenberg, Kirsti & Hanf, Jon H. & Jungklaus, Sven-Oliver, 2007. "PR - Changes In Agricultural Industries Bio Fuel Chains – Analyzing Structure, Options, And Impacts," 16th Congress, Cork, Ireland, July 15-20, 2007 345371, International Farm Management Association.
  • Handle: RePEc:ags:ifma07:345371
    DOI: 10.22004/ag.econ.345371
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    References listed on IDEAS

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