Biofuel demand changes markets

INCREASED demand for biofuels is causing fundamental changes to agricultural markets that could drive up world prices for many farm products, according to a new report published by the OECD and the United Nations’ Food and Agriculture Organisation.

The OECD-FAO Agricultural Outlook 2007-2016 says temporary factors such as droughts in wheat-growing regions and low stocks explain the recent hikes in farm commodity prices.

But when the focus turns to the longer term, structural changes are underway which could well maintain relatively high nominal prices for many agricultural products in the coming decade. Reduced crop surpluses and a decline in export subsidies are also contributing to these long-term changes in markets.