July 31, 2007

 

Global grain prices to remain high on biofuel demand

 

 

Grain and oilseed prices are seen to be steadily high due to biofuels according to German grain trading house Toepfer International, an agribusiness unit of Archer Daniels Midland. 

 

In a statement on its annual results, Toepfer said: "As simultaneously demand for food and animal feed continues to rise, above all in rapidly developing countries including China and India, all market participants, especially processing companies, must prepare themselves for a long phase of relatively high prices for agricultural commodities."

 

Toepfer said higher prices were needed to encourage farmers to raise global grain and oilseeds production and to start cultivation on idle land. It added that high prices will be stymied through record harvests in 2008.

 

The company reported that in the 2005/06 grain season, about 72 million tonnes of grain were used worldwide for ethanol production compared to 56 million tonnes used in 2000/01. Around 5.5 million tonnes of vegetable oil was used for biodiesel compared to 3 million tonnes in the previous year and 700,000 tonnes in 2000.

 

Toepfer said many countries are following the examples of Brazil and US in using grains for biofuel. Brazil uses corn or sugar beef for bioethanol; corn for US and rapeseed for European Union.

 

Further, sales of biofuels are being promoted in a targeted way using tax incentives or compulsory blending and this could trigger bigger demand for agricultural commodities for biofuel output in the coming years, the company report said.

 

Toepfer said in 2007, more than 100 million tonnes of grain will be processed into ethanol  while processing of vegetable oils into biodiesel could increase to 8 million tonnes.

 

Rising biofuel production would also lead to medium-term changes in global trading patterns, it said. Ukraine, Kazakhstan, Russia, Bulgaria and Romania will be the new participants in biofuels, it said.

 

Toepfer said it expected to profit from its previous decision to expand in these countries.

 

Toepfer said it raised turnover in its 2005/06 financial year by 1 percent on the year to 5.8 billion euros. The company traditionally does not release earnings figures.

 

Higher sales of animal feed, oilseeds and vegetable oils were largely behind a 3 percent increase in traded volumes on the year to 39.7 million tonnes.

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