Biofuel Profits To Boost Grain Prices

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Maize (corn) will lead a rebound in grain markets next year, boosted by growing demand from the biofuels sector with U. S. ethanol production becoming profitable again, a leading grains analyst says.

Simon Bentley, director of grains research for LMC International Ltd., said a combination of the global economic downturn and a surge in production of wheat from the Black Sea region may have saved the U.S. ethanol industry.

“I would expect next year possibly to have a maize-led recovery in the market,” he told the Home-Grown Cereals Authority’s annual outlook conference.

“If we get a very good yield next year you can push our grain prices flat for another couple of years, if you get yield hit next year you will see the market turn around very quickly,” Bentley added.

Wheat prices had risen sharply in 2007 and peaked in early 2008 before the global economic downturn and a sharp rise in output in the Black Sea region triggered a rapid decline.

“If we hadn’t had the world economic crisis and the Black Sea hadn’t responded you would have seen grain prices I’m sure that you wouldn’t have believed,” Bentley said.

“As a result of that I’m sure U.S. biofuels policy would have changed,” he added.

Russian wheat production climbed to 63.7 million tonnes in 2008 from 49.4 million a year earlier while Ukraine saw a rise to 25.9 million from 13.9 million, according to International Grains Council figures.

This year wheat production slipped back to 60.0 million and 20.0 million respectively.

“You can find wheat cheap enough in Europe today to make biofuels work and people are starting to make money again in U.S. ethanol,” Bentley said.

Two major British bioethanol plants are due to come online in the next few months, each using around one million tonnes of wheat a year.

Bentley, who visited Moscow a couple of weeks ago, said Russia was eyeing the rise in wheat-based ethanol production in both Britain and the Netherlands as a potential market as it sought to dispose of high stocks.

“Near term there is eight million tonnes of wheat in Russia which they really don’t want to hold… one market that was mentioned in Russia a couple of weeks ago as being interesting is a developing market in Britain and the Netherlands for these ethanol plants.

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