Report addresses export impact of EU Renewable Energy Directive

By Erin Voegele | April 06, 2012

A report funded by the United Soybean Board demonstrates that EU’s renewable energy policy could cost U.S. famers income by lowering the price of soybeans they produce. Specifically, the report, titled “Economic Impacts Related to Energy Directive (RED) Implementation in Europe,” finds that by excluding U.S. soybean oil from use in renewable energy quotas, the program could decrease soybean prices by up to 35 cents per bushel. This equates to more than $1.1 billion in total cost to U.S. famers per year.

“The EU is the second-largest market for U.S. soybeans, and that market is at risk due to this regulation,” says Marc Curtis, a soybean farmer from Leland, Miss. “We can use this study to show allied organizations and the U.S. government how much of an impact this regulation would have on U.S. soybean farmers. It will also give the U.S. government facts to demonstrate to the European Commission that the regulation needs to be based on sound science.”

The study also points out that the RED would negatively impact the cost of shipping U.S. soy to other markets. While U.S. farmers currently enjoy an advantage of 10 cents a bushel over Brazilian and Argentinian soy imports entering Europe, the study shows that U.S. soy achieves an advantage of less than 3 cents per bushel in shipping to China and India.

The analysis focuses on three different scenarios. The first assumes that only U.S. soybeans are ineligible for RED compliance. The second assumes that all soybeans produced outside the EU are deemed ineligible for the program. Finally, the third scenario considers the impact if all non-EU sourced feedstocks were ineligible for compliance with RED mandates.

Results of the analysis show that under the first scenario, U.S. farmers could lose $270 million in revenue, or 8 cents per bushel. The second scenario would result in a more significant loss revenue of nearly $1.2 billion, or 35 cents per bushel. The third scenario, which the analysis rates as exceedingly unlikely, would result in more than $1.3 billion in lost revenue, which equates to 39 cents per bushel.

While under current trading mechanisms, soybeans, soy oil and soy meal produced in the U.S. and exported abroad flow primarily to the EU, the analysis shows that could change under the three scenarios presented. Under the first scenario, the study projects that soybean and soy oil would primarily reach markets in the Far East. Under the remaining two scenarios, the study found that U.S. producers would export soy meal to the EU, but that soy oil exports would flow primarily to the Far East. 


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