A 10-year sales contract signed by Nufarm with global energy major BP for a biofuels ingredient has enhanced the opportunity for the farm chemical maker to grab a share of the huge global market opening up for sustainable aviation fuel.
Nufarm chief executive Greg Hunt said the sales deal involving Nufarm’s seed technology subsidiary, Nuseed, would support the company’s ambitions for major growth in its innovative seeds and oils business, which includes its Omega-3 canola product and others.
“If we look at revenues that we generated from our seeds platforms in 2021, which was about $250 million, we can see that by 2030 being close to $1.5 billion,” Mr Hunt told The Australian Financial Review, foreshadowing figures to be presented at Nufarm’s investor day on Thursday.
“That’s the exponential growth that we can see from this suite of oils, and Carinata will be a part of that. It’s huge and we’re obviously very excited about it.”
Shares in Nufarm rose 2.9 per cent to $4.58.
The deal will see BP’s North American business buy Nuseed Carinata oil, to process it or sell it into growing markets for the production of sustainable biofuels, with a focus initially in Europe and North America.
Carinata is a non-food crop that can be used to produce low-carbon biofuel feedstock that is independently certified and sustainable. It reduces emissions when its oil is used to replace fossil fuels, and removes atmospheric carbon, and restores soil carbon while it grows.
Grown as a “cover crop”, in between the harvesting and re-planting of other crops, it can provide farmers with extra income at the same time as improving their soils.
Bioenergy is expected to play an important part to help reach net zero emissions by 2050, and a road map released by the Australian Renewable Energy Agency last November predicted an enhanced bioenergy industry could be worth $10 billion a year and create 26,200 new jobs by 2030.
Globally, BP, which produces renewable diesel from biomass, has a target to more than double its bioenergy portfolio by 2025, and to quadruple it by 2030, from 2019 levels.
Carol Howle, executive vice president, trading and shipping at BP, underscored the vital role sustainable biofuels have to reduce carbon emissions from transport.
“By working with Nuseed, we can use their sustainable feedstock to help decarbonise challenging transportation sectors such as aviation, supporting the production of sustainable aviation fuel and other biofuels,” Ms Howle said.
Demand for sustainable aviation fuel is forecast to jump more than fifty-fold to 449 billion litres a year by 2050 from 7.9 billion litres a year in 2025.
Nufarm bought the Carinata technology less than three years ago from Agrisoma and has since developed traits and varieties to create a hybrid variety that is proprietary to it. It started negotiating with BP more than 12 months ago as it sought to secure a customer for the oil from the crop.
Mr Hunt said the short-term impact to earnings from the deal would not be material “but it has the potential to significantly increase its contribution to earnings as production ramps up in later years”.
The agreement will see Nuseed continue to develop and expand its existing network of growers and supply chain partners to deliver Carinata oil to BP or its affiliates. BP will make payments to Nuseed, subject to meeting milestones, that will help support the cost of expanding the supply of Carinata.
Nufarm said Nuseed is in the process of increasing commercial production of the crop in Argentina and is planning expansions in South America and the US, supported by the contract with BP.
The development of Carinata is part of Nufarm’s focus on working up potentially breakthrough, plant-based solutions to help solve some major global problems such as climate change and human nutrition.
Extracted from AFR