Datagro: Ethanol output raises commodity prices

Global ethanol production is driving up prices for food commodities, from
feed stocks such as sugar, to meat, said Datagro, Brazil’s
biggest sugar-industry forecasting firm.

US production, forecast to increase more than 70% by 2012, will use 37% of
the country’s current corn supply to meet output needs, up 15% from 2006,
Datagro said.

Land for soy crops is increasingly being diverted to grow corn, reducing the
supply of soy and driving up the price of animal feed, according to the firm. In
China, competing demand for corn from the food and ethanol industry may lead the
country to reduce exports and become a corn importer, Datagro said.

“World sugar, meat, corn, soy and wheat are becoming more interdependent with
ethanol,” Plinio Nastari, president of Datagro, said at an International Sugar
Organization seminar in London.

Government interest in biofuels, made from corn, sugar or vegetable oils, is
motivated by a desire to replace fossil fuels, limit greenhouse gases and assist
farming. Support programs are the main driver of industry growth, especially in
Europe.

World ethanol production is forecast to total 34.5
million litere in 2006, representing 3% of global demand for gasoline, according
to Datagro.