Biofuel demand powering long-term food inflation /

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Food prices will rise [...] supported by the growth of the biofuel industry and increased food demand in emerging countries, a study warned yesterday.
"Growth in the use of agricultural commodities as feedstock to a rapidly increasing biofuel industry is one of the main reasons for international commodity prices to attain a significantly higher plateau,"
"Biofuel demand creates a fundamental new demand for agriculture commodities that was non-existent only five years ago."
The report forecast that in 2016 about 32 per cent of the US maize crop would be devoted to biofuel, up from 20 per cent today.
EU wheat crop transformed into road fuel would surge 12-fold in the next 10 years, it said. By 2016, the EU will use 58 per cent of its rapeseed crop to feed its biofuel industry.

Environmental developments:

Increasing depletion of agricultural surfaces and soil quality, threats by changing weather patterns.

Reference data for comparison:

fossil energy developments

Food outlook (FAO)

BBC NEWS Wheat prices reach record level 24 August 2007

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Copyright notice We transcribed this article for reference purposes only.

Biofuel demand powering long-term food inflation

by Javier Blas in London, Financial Times 5 July 2007, page 5.

Food prices will rise by between 20 and 50 per cent over the next decade from average levels over the last ten years, supported by the growth of the biofuel industry and increased food demand in emerging countries, a study warned yesterday.

The report by the United Nation's Food and Agriculture Organization (FAO) and the Organisation for Economic Cooperation and Development (OECD), added that long-term prices would be up to 30 per cent higher than previously estimated.

"Growth in the use of agricultural commodities as feedstock to a rapidly increasing biofuel industry is one of the main reasons for international commodity prices to attain a significantly higher plateau," the report said.

The warning is likely to re-ignite the debate on food versus fuel amid concerns that biofuel production is pushing up food inflation.

It would also provide support to those in the market who see high agriculture prices continuing in the next few years.

Several investment banks, such as UBS, have recently expanded their commodity operations to the agriculture business as prices have risen.

Loek Boonekamp, head of the agriculture division at the OECD in Paris, said: "Biofuel demand creates a fundamental new demand for agriculture commodities that was non-existent only five years ago."

Plantation patterns have already changed because of demand for biofuels.

US farmers have increased their acreage dedicated to corn by 19 per cent from last year, to the highest since 1944. But they have cut cotton acreage by 28 per cent and soyabean by 15 per cent, according to Barclays Capital estimates.

"In a context of generally lower global stocks in recent years, this additional demand is expected to underpin prices," the report said.

In the last 12 months, corn prices have risen by 60 per cent, wheat by 53 per cent and soyabean by 40 per cent.

The FAO revised up its long-term estimates for cereals prices by between 20 and 30 per cent, meat by 20 per cent and dairy products by 25 per cent. The report sees wheat trading in the long term at about $180 a tonne, up from $150 in last year's report, and corn at about $140 a tonne, up from about $110 a tonne.

Although biofuel influences meat and dairy prices through high feeder prices, Mr Boonekamp pointed to the reduction in European Union's farm subsidies and the increase in protein demand in emerging countries as the main factor behind the price surge.

"Agriculture production costs, such as fertilizer prices and fuel, also increased in the last few years pushed by higher oil prices," added Merrit Cluff, a senior economist at FAO in Rome. Biofuels are produced in the US mainly from corn, wheat and soyabean, while rapeseed oil and wheat are the main ingredients in Europe. The report forecast that in 2016 about 32 per cent of the US maize crop would be devoted to biofuel, up from 20 per cent today.

EU wheat crop transformed into road fuel would surge 12-fold in the next 10 years, it said. By 2016, the EU will use 58 per cent of its rapeseed crop to feed its biofuel industry.

Copyright The Financial Times Limited 2007 / reproduced for reference reasons only.

*www.foodnews.ca* dated 24 August 2007

*Editor's Note:* Poor weather conditions around the globe are responsible for reduced wheat crops from China and North America to Europe and Australia. Wheat reserves are now estimated to be at a 26-year low and prices at record highs. High prices will benefit wheat growers but will be costly for importing countries, meat and dairy farmers who use wheat as feed and consumers. The World Food Programme also warns that its budget will not stretch as far with high wheat prices

BBC NEWS

Wheat prices reach record level

*Wheat prices have hit record highs on global commodity markets, bringing the threat of rising bread prices. *

Bad weather in key grain growing areas such as Canada and parts of Europe has limited supplies as demand has risen, sparking fears of a supply shortfall.

Surging prices are also expected to have widespread fallout for consumers.

While it will mean higher bread prices, it could also trigger an increase in meat and dairy prices as farmers battle to pass on rising feed costs.

Global wheat stockpiles will slip to their lowest levels in 26 years as a result, official US figures predicted earlier this month.

*Output fall *

The dire forecast came as Canadian officials said the country expected its harvest to be slashed by a fifth as a result of drought.

Meanwhile, its rival Australia - the world's third-largest wheat exporter and a key supplier to Asian regions and South America - has also warned harvests may be reduced by warmer-than-expected temperatures experienced in the spring.

Crops in the Black Sea area of Europe, however, have been ruined by bad weather, while Chinese production is expected to fall by 10% as a result of both flooding and droughts.

And as supplies fall, demand from emerging economies such as India is increasing - factors which helped push prices to record highs of $7.44 a bushel on the benchmark Chicago Board of Trade market in the US on Thursday.

*Consumer fallout *

In the UK, prices have also soared, with bread-making wheat now fetching about £200 per tonne - double last year's level.

While surging prices are beneficial to wheat growers, they do bring further problems.

A World Food Programme spokesman said the increases could mean its budget would not stretch far enough to help those affected by natural disasters.

Meanwhile, accountants Deloitte have warned spiralling wheat prices will add to woes facing British farmers, already suffering in the face of recent floods and foot-and-mouth scares.

"Consumers hold the key to a more resilient future. UK shoppers will have to pay more for their meat," said Richard Crane, food and agriculture partner at the group.

Story from BBC NEWS: http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6962211.stm

Published: 2007/08/24 12:32:24 GMT

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