Biofuel production changing global food demand - A Rabobank Report

Corn is attracting a lot of market attention as corn farming to bioethanol manufacturing increases in the United States and worldwide. This report by Rabobank Food and Agriculture Research and Advisory (FAR) explains how rapid growth of the biofuel industry is causing uncertainty in the soft commodities market.

Michael Whitehead and Jennifer Cole, authors of the FAR report, state, 'The biofuel manufacturing boom throughout the United States, Europe, Asia, and Brazil will cause a sharp rise in demand for commodities such as sugar and corn, doubling current demand levels by 2010.'

Report highlights:

• The world soft commodity market (including grains, oilseeds, cotton and sugar) has changed from being shaped by supply to by demand. 
• Demand is now largely driven by the growing biofuels industry, as well as demand created globally by rising income levels.  
• Market conditions including high commodity prices, strong long term demand forecasts and nervousness over equity markets have attracted a number of new investors and new players into the soft commodities market.
• Cattle, pig and poultry producers are becoming increasingly concerned as more corn is being harvested for ethanol rather than animal feed.  
• Rising corn prices are impacting food sources, such as Mexico’s staple diet of tortillas. 
• Farmers will search for new ways and technology to increase yields to take advantage of higher corn prices.  Farmland prices may rise as farmers search for more acreage, not only to increase production, but also because it is not agriculturally viable to plant next year’s corn crop on this year’s cornfields.   

Soft commodities: biofuels and new players defining the new world demand (PDF)