New study says that corn prices could increase up to 72 percent; oil seeds by 44 percent

A new study by the International Food Policy Research Institute, “The World Food Situation: New Driving Forces and Required Actions” said that, based on existing and announced biofuel plant capacity, corn prices would increase by 26 percent and oil seed prices would rise by 18 percent by 2009.

In a second scenario, based on doubling planned capacity, corn prices would increase by 72 percent and oil seeds by 44 percent. The Institute said that either scenario would result in less food availability and calorie intake globally, with the most acute effects felt in in Sub-Saharan Africa.

A recent study by the Bureau of Labor Statistics showed that the price increase for milk, cheese, meat, ice cream, eggs and malt beverages in April 2006 with April 2007 was 3.0 percent, vs a 25-year annual inflation rate of 3.0 percent.

A biannual IMF report on the world economy said that “The use of food as a source of fuel may have serious implications for the demand for food if the expansion of biofuels continues. One country’s policy to promote biofuels while protecting its farmers could increase another (likely poorer) country’s import bills for food and pose additional risks to inflation or growth.”

The report said that greater international cooperation on biofuel production was needed, and that eliminating barriers on biofuel imports in the US and the European Union would alleviate pressure on the cost of food.

Recently, the chief economist of CIBC World Markets, criticizing the US drive to increase ethanol production, said that “the only thing Bush’s renewable energy policy will fuel is inflation”.

Jeff Rubin linked expansion of ethanol to a 60 percent increase in corn prices, and said food inflation would top 5 percent in 2008 and approach 7 percent in 2009. He said that soaring corn prices passed directly into animal feed costs and tortillas, but are also causing increases in the costs of other grains as corn production replaces other types of production.

Meanwhile, the March contract for soybeans reached $12.03, the highest price since 1973, while the March contract for corn stands at $4.33, up 14 percent this year after an 81 percent rise in 2007. By contrast, the primary feedstock for ethanol, sugar, has been falling.

The March contract for white sugar on the LIFFE exchange stood at 13.57 cents per pound, with sugar down 14.5 percent for 2007.

Free Subscription to the Daily Biofuels Digest e-newsletter

Related Stories

USDA projects slowdown in corn ethanol growth rate; using 35 percent of US corn crop by 2020

The U.S. Department of Agriculture (USDA) has released projections that show a significant slowdown in the growth of corn ethanol over the next 10 years. The USDA study found that, by 2020, the corn e...

US ethanol production capacity to increase to 13.3 billion gallons in 2008

U.S. ethanol production capacity reached 7.5 billion gallons by the end of 2007, a 40 percent increase over 2006. National production capacity will increase to 13.3 billion gallons at 136 facilities i...

South African food price increases blamed on biofuels

South Africa's National Agricultural Marketing Council (NAMC) has blamed biofuels, among other factors, for food prices increases. The council reported price increases between July 2006 and July 2007 ...

Morgan Stanley projects 20 percent rise in corn, soybean prices in 2008

Morgan Stanley is projecting that corn and soybean prices will increase 20 percent in 2008, to $6 per bushel for corn and $18 per bushel for soybeans. The Morgan Stanley research team said "U.S. produ...

US Ag Secretary says food prices will rise 3.5 to 4.5 percent in 2007; ethanol getting too much blame

The Acting Secretary of Agriculture, Chuck Conner, said ethanol is getting too much heat "for what's happening in grocery store aisles." Conner predicted food costs would rise between 3.5 and 4.5 perc...

Corn ethanol reduces greenhouse gases by 40 percent compared to gasoline, and can expand to 33 billion gallons by 2030, new studies find

The Illinois Corn Growers Association released two studies from the ProExporter Network and the University of Illinois' Chicago's Energy Resources Center, that conclude that US ethanol production has ...