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Ethanol production sees reduced role in UK wheat outlook

24 May 2012, 2.44 pm GMT

Ethanol production sees reduced role in UK wheat outlook

London, 24 May (Argus) — The UK government has cut its forecast for annual wheat demand at domestic ethanol producers, with the country's two largest production plants still commercially idle.

“No significant 2011-12 wheat usage is forecast for either bioethanol plant, as [Ensus] is currently out of production and [Vivergo] is not expected to be on line until summer,” according to the May supply and demand update from the UK Department of Environment, Food and Rural Affairs (Defra).

Defra in response has moved to reduce its anticipated annual wheat demand for human and industrial consumption by 48,000t to 6.81mn t for the 2011-12 season.

In contrast, forecast wheat usage for animal feed has been increased by 91,000t to 6.54mn t, an increase of 6pc on 2010-11, while total wheat availability is forecast at 17.69mn t, with imports unchanged at 900,000t and exports at 2.45mn t, or 205,000t lower than 2010-11.

The 400mn litres/yr Ensus plant was mothballed in May last year, with executives blaming poor sales on delays to the implementation of the EU's renewable energy directive (RED), and sustained imports of cheap denatured ethanol blends from the US. But an EU-wide change to ethanol import tax legislation has effectively closed off the arbitrage to Europe of cheap US-produced ethanol/gasoline blends, while Ensus' RED-compliant sustainability scheme has won European Commission approval, increasing the plant's access to Europe's major continental ethanol markets.

Commissioning and initial ethanol production at the recently built 420mn l/yr plant operated by Vivergo Fuels is understood to be “well under way”, with grain deliveries expected to “ramp up significantly”, according to UK-based wheat and grain marketing company Frontier Agriculture.

UK investment fund Future Capital Partners this week announced that fundraising for a planned 200mn l/yr bioethanol refinery is nearing completion. The new plant will be based in Grimsby and will join the Vivergo and Ensus facilities in capitalising on the region's close proximity to UK grain suppliers and favourable transport links to Europe.

With the possibility of three major ethanol production facilities operating in the region within the near future, the Humber estuary has quickly emerged as a potentially significant ethanol production cluster for the UK and European markets.

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