Biofuels Cause Price of Grains to Surge

It’s not just oil that going through the roof. Agricultural commodities rose to multi-year highs today as traders anticipated higher demand from the expanding global biofuels industry.

In Chicago, the Financial Times reports “wheat jumped 16 cents to $9.31 a bushel, 59 cents below its all-time high, while soyabeans rose to $12.38, a fresh 34-year high, and corn traded within touching distance of its recent 11-year high. In Paris, rapeseed prices rose to record levels, up 1.5 per cent to €444.75 a tonne, while Malaysian palm oil futures also hit a record $961 a tonne Thursday.”

As grains and oil seeds are key feedstuffs for biofuels, the oil price rise has exerted a huge push on agricultural commodities, which enjoyed their best returns for almost 30 years in 2007.

“This combination of food, feed and fuel demand for crops has created an upward shift in the trend demand growth for agriculture products,” said Jeffrey Currie, head of commodities research at Goldman Sachs.

As commodity prices increase so the rich can drive, what happens to the world’s poor?