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Home / Bioethanol / News No fuel link to wheat pricesThe Weekly Times THE US biofuel industry has been blamed for rising wheat prices, which hit new highs on the Chicago Board of Trade last week. But it appears biofuels may have been falsely accused. Market supply and demand factors largely cause prices of any basic commodity to boom or plummet. The wheat futures price hit $US7.84/bushel, or $A355/ tonne, on the CBOT last week. In the past week, both food manufacturer Goodman Fielder and the Victorian Farmers Federation said the US ethanol market had played a part in increasing wheat prices. Announcing its annual results, Goodman Fielder—one of Australia's largest providers of bread—said a 25 per cent rise in wheat for the year to June 30 was due to a big increase in demand from Asian countries and biofuels, plus droughts around the world. VFF policy director Graeme Ford said the high wheat price had been driven by the US ethanol market. The VFF has argued against mandated levels of biofuels in conventional fuels before the Victorian Parliament's Economic Development and Infrastructure Committee. Unlike the US, wheat has been identified as the dominant feedstock for ethanol production in Victoria. The VFF argued that mandating biofuels in Australia would push up wheat prices by 25 per cent above the world market and the livestock sector could ill-afford such high costs. But an analysis by The Weekly Times shows the US ethanol market has had virtually little impact on wheat prices. If the US biofuels market was responsible for the hefty rise in the wheat price, crop production and the area planted would have decreased in favour of corn, the grain used to produce ethanol. According to US Department of Agriculture statistics, American farmers are expecting to harvest 57.53 million tonnes of wheat this year. That is 17 per cent higher than the 49.32 million tonnes grown last season—one of the smallest wheat crops in recent years, largely due to poor yields. The USDA statistics show the wheat area harvested this year at 21.1 million ha is slightly above the 10-year average. By comparison, US corn production is expected to be 24 per cent higher and the area harvested 17 per cent larger than last season. At 331.58 million tonnes, the American corn crop is the largest on record. An extra six million ha of land was used to grow corn this year compared to last season. Largely, that has been at the expense of soybeans, which fell by 4.6 million ha. Commodity analysts say wheat prices have been driven by tightening world stocks and falling yields in the major exporting countries. Worse-than-expected wheat crops or wet harvests in the US, Russia, Canada, the Ukraine and Europe have kept the market on tenterhooks for months. The CBOT is also becoming aware of the poorer state of the Australian wheat crop. With about nine weeks supply of world stocks expected to hang over the crop, market speculation has forced up prices. As further evidence of the disjointedness between wheat and corn prices, the latter fell last week just as wheat spiked upwards. The corn price is now $US134/tonne and wheat $US285/tonne. Four months ago, the corn futures price was $US145/tonne, while wheat was $US189/tonne.
Date: 05.09.2007 Leave your comment
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