Biofuels to keep the price of grains high in 2008

Wednesday, March 5, 2008 | 12:04 p.m. CST; updated 12:50 p.m. CDT, Wednesday, July 16, 2008

COLUMBIA — Grains prices are expected to remain high in 2008, benefiting corn and soybean farmers, while livestock producers will continue to see high feed costs.

That’s part of a Columbia-based agricultural research group’s annual report to the U.S. Congress that was released this morning.

In a Wednesday morning teleconference, livestock analyst Scott Brown of MU’s Food and Agricultural Policy Research Institute said that “in an overall summary of the issues, it’s hard to say anything without including the biofuel arena.”

The growth of ethanol coupled with strong export demand have led to rising corn prices.

“Agricultural market outlooks appear more uncertain than in past years,” Pat Westhoff, co-director of FAPRI, said in an accompanying news release. “Petroleum prices and biofuel policies drive most of the changes.”

Ethanol demand nearly doubled between 2005 and 2007 and is a reason why U.S. corn acreage was at its highest level since World War II, according to the FAPRI report.

Brown said in the teleconference that overall planted acreage in the U.S. is expected to increase by 4 million acres, often from the conversion of pasture land.

This year, corn will “battle for acres” with soybeans and wheat, Westhoff said. Rising production of biodiesel will increase the international and domestic demand for vegetable oils made from soybeans. FAPRI expects a 6 million-acre increase in soybeans and a 2 million-acre decrease in corn nationwide.

Brown said FAPRI will continue to watch commodities carefully “as acreages may substantially change given price changes.”

The consumer price index for food increased 4 percent last year, which was more than the increase for other goods and services. Brown said it’s expected to rise 3.7 percent in 2008.

“Much of that increase came from rising energy prices, which increased costs all along the marketing chain including the farm level,” Brown said in the release.

Some of the price increase is in response to international shortages. For example, a drought in Australia spoiled its wheat crop, causing U.S. exports to increase and prices to jump. FAPRI expects wheat prices to fall but remain higher than before 2006.

“Projecting future prices was uncertain in the best of times,” Brown said. “We assume average weather in the baseline; however, a drought in any year when grain stocks are tight would change everything.”

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