Biofuels could strengthen Australia’s fuel security and create new markets for the country’s farmers at the same time, Rabobank says in a newly-released report.
The agribusiness banking specialist’s RaboResearch division says, in a world where many of Australia’s global agricultural competitors have greater fuel security and less exposure to export markets for their farm products, “Australia may want to consider using part of its agricultural production to build a more resilient and secure domestic fuel supply”.
The report, titled Biofuels could strengthen Australia’s fuel security and create new markets for farmers, says as one of the world’s largest importers of diesel and jet fuel, Australia’s heavy reliance on imports leaves farmers, freight operators, mining, airlines and motorists exposed to global supply disruptions and price spikes.
Other major agricultural exporters – including the US, Brazil and the EU – have reduced similar risks by producing biofuels from locally available crops, animal fats and waste oils, Rabobank says. And Australia has the feedstock base to pursue similar opportunity.
The report notes Australia imports approximately 80 per cent of its diesel needs and is in the top 10 importers of jet fuel and the top 15 for petrol.
Report author, RaboResearch general manager Stefan Vogel says for Australia’s food and agribusiness sector, the country’s heavy reliance on imported diesel and jet fuel is both a “strategic vulnerability” and a “market opportunity”.
“Recent global diesel shortages and price spikes raise an important question for Australia: ‘are competing agricultural exporters better protected from fuel supply disruptions because they produce more fuel domestically, including biofuels?’,” he said.
“Other regions demonstrate how biofuels can materially reduce fuel-import exposure while at the same time creating large, durable outlets for agricultural products.”
The report said Australia has sufficient canola, grain, sugar, tallow and waste-oil resources to theoretically replace a “meaningful” share of the country’s transport fuel.
“And a domestic biofuels industry could also provide a stronger domestic demand base for local farm products. Rather than exporting large volumes of feedstocks as unprocessed products, Australia could capture more value from processing while supporting jobs that might otherwise be created overseas,” Mr Vogel said.
He said more than 70 per cent of Australia’s grains, canola and sugar are exported, enhancing the risk for farmers in times of trade friction and heightened geopolitical tension. “Local value-add provides options for farmers when they sell their products and can result in better prices,” Mr Vogel said.
Lessons from abroad
The report says several major grain and oilseed exporters that compete with Australia – including Brazil, the EU and Indonesia – have built large biofuels industries over the past two decades, supported by effective local legislation.
“Brazil, the EU and Indonesia produce biodiesel volumes that materially offset their diesel import requirements,” Mr Vogel said. “The US, Brazil and the EU use large quantities of vegetable oils, animal fats and waste oils for biodiesel production, as well as corn and sugarcane for bioethanol to substitute gasoline. And many countries are currently evaluating the potential to build renewable fuel capabilities for aviation that could use crops as feedstocks.
“Besides improving local fuel availability, the biofuel industries in those countries also provide farmers and processors with significant additional outlets for oilseeds, grains, sugar and livestock by-products.”
Local feedstock ‘opportunities’
The report says Australia’s existing canola exports – which have averaged 5.7 million tonnes annually over the past five years – could theoretically replace more than nine per cent of the country’s annual diesel use if converted to biodiesel, with “further upside” if canola acreage expanded and other feedstocks – such as tallow, used cooking oil, cottonseed and non-food oilseeds – were included.
Additionally, it said, Australia’s grain and sugar export volumes could theoretically replace approximately 10 and 20 per cent of petrol use, respectively, if converted to ethanol.
Alternatively, Australian canola, sugar and grain export volumes could theoretically replace more than half of Australia’s jet fuel needs if directed into sustainable aviation fuel production (rather than biofuel production for road transport).
Targeted and staged approach
Acknowledging these figures are “theoretical conversion estimates”, rather than likely outcomes, the report says Australia would not need to redirect all agricultural exports to improve fuel security.
“Even a targeted domestic biofuels industry could diversify fuel supply, reduce exposure to global supply disputations and provide farmers and processors with a stronger domestic demand base for farm products,” Mr Vogel said.
However, he said, capturing this opportunity would likely require coordinated action, including “credible long-term government policy, investment in processing and distribution, robust sustainability standards and careful management of food exports and land use”.
“Australia may want to assess biofuels as an integrated fuel security and agricultural market strategy. A staged approach focused on the most competitive feedstocks and uses could build resilience, develop new value chains and test commercial viability without compromising existing markets,” Mr Vogel said.
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Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 125 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 35 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 87 branches throughout Australia and New Zealand.