Biofuels may wipe out UK wheat exports

By Nigel Hunt - Analysis

LONDON (Reuters) - Surging demand for British grain around 2010 as major bioethanol plants come on line will wipe out the UK's wheat exports unless there is a big jump in output by domestic farmers.

"They (bioethanol plants) are positioned so they can take imports, which is sensible. We are not far from wiping out the exportable surplus," said Mark Isaacson, chief executive of farmer cooperative Fengrain.

Britain's wheat outlook has been transformed this week by news that oil major BP (BP.L), Associated British Foods (ABF.L) and U.S. chemical company DuPont (DD.N) plan to build a bioethanol plant in Hull.

"The ABF/BP/DuPont project in Hull will change the dynamics of the UK wheat market," said Malcolm Shepherd of consultants BioFuel Matters.

The plant is expected to consume about one million tonnes of wheat a year and follows the announcement of a similar plant from Ensus in Teesside, financed by two U.S. private equity funds.

Both plants should come on line sometime during 2009 and make their impact on Britain's wheat market in 2010.

Demand for biofuels is expected to climb in 2010, driven by government rules that five percent of motor fuel must come from renewable sources by that year.

Britain has an exportable wheat surplus of about 2.5 million tonnes but that total is expected to fall by about 750,000 tonnes later this year when a Cargill sweetener plant in Manchester, which uses wheat as its feedstock, comes on line.