Ethanol, soy demand drive up food prices

WASHINGTON – Supply strains caused by rising demand for soybeans from China and corn for ethanol are fueling the rapid rise in world food prices, according to a study by Purdue University economists.

Greater biofuels consumption and China’s demand for oilseeds required 46.5 million acres of U.S. farmland in 2010, almost triple the amount in 2005, the researchers said in a study released Tuesday in Washington, D.C. A weaker dollar that’s made U.S. exports more attractive, weather disruptions and demand that has become less responsive to supply disruptions have added to price pressures, according to the report.

“The current tight-stocks period and relative high prices are expected to continue for the next one to two years,” the authors said in the study. “Ultimately, the question is whether world supplies can not only catch up with recent demand increases, but keep pace with demand growth over time.”

Global food prices have soared 39 percent in the past year, reaching a record in February, according to U.N. data. The increased costs have contributed to the unrest in northern Africa and the Middle East that resulted in the overthrow of leaders in Tunisia and Egypt. U.S. food expenses rose 3.7 percent in the 12 months through June, government data show. During that period, rice, wheat, corn, soybean and milk futures touched the highest levels since at least 2008.

The report was released at a forum in Washington sponsored by the Farm Foundation, the Oak Brook, Ill.-based non-profit organization dedicated to agricultural issues that commissioned the study. The Purdue study, produced by Wallace Tyner, Philip Abbott and Christopher Hurt, did not assign proportions to how much each factor was driving food prices.

source: journalgazette