April 28, 2008

Biofuel impact on grain and oilseed prices overstated

Grain and oilseed consumption for biofuels is "mostly overestimated" and "limited" in terms of their share in total global usage, German analytical firm F.O. Licht said Friday (April 28, 2008).

In 2007, 4.5 percent of global grain usage was to make fuel alcohol and 3.3 percent in 2006, F.O. Licht said in a report. However, once animal feed biofuel co-products (such as DDGS) are factored in, those figures fall to 3 percent for 2007 and 2.2 percent for 2006, F.O. Licht said.

Price increases for wheat, corn and oilseeds were caused by speculative buying and higher energy costs rather than biofuels, according to F.O. Licht. The assumption that biofuels sector would raise prices for these commodities also led to a self-fulfilling prophecy.

However, the report added the influence of biodiesel on the global vegetable oil market was more significant, with some 5.9 percent of total supplies used to make biodiesel, up from 3.7 percent in 2006.