Biofuels only partly to blame for high food prices

Rising biofuel demand is among multiple factors fueling food inflation around the globe, but markets today are more able to manage that impact than in 2007, when an aggressive U.S. government mandate sent prices soaring, an agriculture industry executive said on Tuesday.

U.S. corn prices this month revisited levels not seen since the months after the amended Renewable Fuels Standard was signed into law, rekindling the debate about whether food products should be used to make fuel.

But this month’s corn market rally to highs near $6 per bushel was driven more by the U.S. Agriculture Department’s lower corn production forecast amid an already tight supply/demand balance than by rising demand from makers of corn-based ethanol, said Tim Gallagher, executive vice president of grains and biofuels with Bunge North America.

Gallagher, speaking in a panel discussion at the Global Financial Leadership Conference in Naples, Florida, declined to comment on how ethanol demand would impact corn prices in the future.

“It’s had an impact. From 2007 to today, we’ve found a way to manage that impact,” Gallagher said of corn demand by ethanol makers, which use about a third of the U.S. crop.

“It depends on the magnitude (of the demand) and how quickly it comes into the market,” he said.


Other factors, such as energy prices, currency fluctuations and grain production woes in other parts of the world, can impact corn prices as well, he said.

U.S. law required 12 billion gallons of corn ethanol to be blended into the U.S. fuel supply this year. The mandate increases to 15 billion gallons by 2015.

Bunge North America is a division of White Plains, New York-based Bunge Ltd (BG.N: Quote), the world’s top oilseed processor and a producer of corn-based ethanol in the United States and sugar cane-based ethanol in South America. (Reporting by Karl Plume; Editing by Walter Bagley)

Source Reuters