December 19, 2007

Australian grain sector sets sights on biofuel

Grains prices are set for further gains next year as demand for grains to make biofuels intensifies, Australia, the world's fifth-biggest wheat exporter, said on Wednesday (December 19).

Chicago Board of Trade wheat futures surpassed US$10 a bushel for the first time this week, partly because of depleted stockpiles aggravated by needs for grains from fuel makers and by lower production in drought-hit Australia.

Cereal based crops, mainly wheat, corn, soy and sugar cane are used to produce bioethanol, a substitute for gasoline. Oilseed based crops such as oilseed rape and palmoil are used to make substitute diesel fuels.

For Australia's farmers, domestic returns on benchmark Australian Premium White (APW 10) should increase more than 50 percent next year, according to the Australian Bureau of Agricultural and Resource Economics (ABARE).

Australian malting barley prices are forecast to rise to A$346 a tonne from A$328 in 2006/07 and A$202 in 2005/06, ABARE said.

Australia's exports of wheat in 2007/08 are likely to be nearly halved as stocks run out after two successive years of drought, exporter AWB Ltd has predicted.

ABARE estimates that Australian wheat production in 2007/08 will be around 12.7 million tonnes, barley about 5.5 million tonnes and canola around 931,000 tonnes.

ABARE this month forecast that exports for the year to June 30, 2008 would fall by 37.9 percent to just 7.0 million tonnes, after a drawdown of 307,000 tonnes from stocks.