Tuesday, July 10, 2007

Biofuels 'to push farm prices up'

Source: http://news.bbc.co.uk/2/hi/business/6270892.stm

Demand for green fuels has been driving recent farm price rises
The rapidly growing biofuel market will keep farm commodity prices
high over the next decade, a key study has said.

According to the report, co-written by the Organisation for Economic
Development (OECD), biofuels will have a major impact on the farming

Even without demand for the "green" fuel, recent falls in output -
thanks to drought and low stocks - will keep prices high, the report

The study predicts prices will rise by between 20% and 50% by 2016.

"Growing use of cereals, sugar, oilseeds and vegetable oils to satisfy
the needs of a rapidly increasing biofuel industry is one of the main
drivers in the outlook," said the report, which was co-written by the
UN Food and Agriculture Organisation (FAO).

Biofuels - made from grains, sugar and oilseeds - are gaining
popularity as countries look to reduce their dependence on fossil
fuels, cut carbon emissions and push farm revenues higher.

Growth market

According to the report ethanol production in the US, which mainly
uses domestic corn, is expected to jump by 50% in 2007 - and to double
by 2016.

Meanwhile in Brazil - currently the world's fastest growing ethanol
producer - biofuel output is set to hit 44bn litres over the next 10
years, 145% more than in 2006.

"Bioenergies have become a key factor in the functioning of
agriculture markets," Loek Boonekamp, a senior OECD official.

"In the medium term we believe that they could lead to prices on
international markets rising quite considerably, at higher levels than
what we had predicted in former outlooks and above the average of the
last 10 years."

Looking ahead, the OECD And FAO expect prices to remain near the
record highs they have hit in recent months.

As well as biofuel demand, other temporary factors which led to low
harvests last year, as well as fears of poor harvests in the future,
are expected to underpin prices at their current levels.

The rise in farm prices could contribute to rising inflationary
pressures worldwide, along with increases in the price of commodities
like oil.


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