The link between the price of a barrel of oil, biofuel production and the
grain price was described in a recent paper given at Pig Focus Asia in Bangkok -
if the cost of a barrel of oil stays high, don't expect grain prices to fall
sharply. Oil price 20 82.28 4.08
That was the clear message from Gerardo Morantes of Cargill
Animal Nutrition, USA.
He related the price of a barrel of oil to the
equivalent grain price, which could be used for economic biofuel (ethanol)
production (see Table 1).
Table 1.
Relationship of oil price and grain price for biofuel production.
($/barrel)Grain price
($/bushel)Grain price
($/metric tonne)
2.09
50
160.62
100
7.38
290.54 (€189)
As oil prices had just gone over $105/barrel at the
time of writing this, it means that grain at prices of approximately €198 (£151)
could still be used to continue to produce biofuel economically.
Continuous demand
If the US maintains its strategy
to increase biofuel production from 4 billion gallons of ethanol to 7.5
billion gallons over the next 5 years (about 5.4% of current gasoline
consumption) this could have a continuous demand on grain markets and supply and
keep prices high, as it could utilise the equivalent of 67 million tonnes of
grain per year or about 25% of the current 267 million tonnes of maize
production.
Europe is also looking at this and biodiesel and would like
to increase their biofuel consumption to a similar 5.75% by 2010.
This is starting to be a very complex game with no clear light at
the end of the tunnel.
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