The Confederation of the Food and Drink Industries of the European Union (CIAA) was responding to a call by the European Commission for political leaders to meet and debate an international approach to biofuel.
"The development of biofuels bears important challenges for the food and drink industry," said Jean Martin, the CIAA's president. "The launch of many biofuel programmes around the globe is contributing to increased tension and high price volatility on agricultural markets. The diversification of biofuel sources is one of our objectives in trying to reduce tensions in certain sectors."
The rapidly increasing demand for wheat and maize for biofuel production has particularly affected prices for those commodities.
Cereals production fell in 2006 due to poor weather in North America, Europe and Australia, with a total shortfall of over 60m tonnes. However, demand for cereal use for ethanol in these regions rose by 17m tonnes.
The greater demand encouraged higher prices, according to a report published last week by the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organisation (FAO).
"Agricultural markets have been reacting to higher energy prices since 2000 in that commodity costs have increased," said the report. "But increased demand for agricultural products in the form of bioenergy feedstocks, largely from sugar, maize, vegetable oils and wheat, constitute an important change from the previous market situation."
The organisations expect maize-based ethanol output to double between 2006 and 2016 in the US.
"Maize prices in the US have undoubtedly been supported by increased biofuel production. There is obviously growing interest in many countries in the development of renewable energy supplies based on the use of agricultural feedstocks," the report stated.
The higher demand has resulted in higher commodity costs for food and drink processors.
The CIAA stated that the industry welcomes a meeting of world leaders on how to sustain biofuel production, adding that it is equally important to ensure the availability and competitiveness of agricultural raw material supplies for the production of food and drink products.
The association also called on the Commission to monitor the availability of agricultural markets and to put into place safeguard mechanisms to prevent or counter any crisis situation.
In developing sustainable biofuel schemes, governments must strike a balance between the objective of protecting the environment and the need for practical solutions that are easy to enforce and to control, Martin stated.
"Imported feedstock for biofuel use will have to comply with the same system, calling for reference to existing international standards including good agricultural practices and specific biofuels sustainability criteria. It is important to allow trade flows to continue without impediments," he said.
The CIAA is also concerned that the EU has set a 10 per cent legally binding target for biofuel use through the member states.
"It must be recalled that any binding character of a target is conditional to production being sustainable and to second-generation bio-fuels becoming economically viable," Martin stated.
