|Tight Global Grain Stocks|
|Written by Neil Billinger|
|Wednesday, 08 August 2012 16:32|
There was plenty of discussion about the "food versus fuel" debate four years ago.
The number of droughts in various locations around the world are combining to create a very tight supply/demand situation for grains and oilseeds.
So far this year, there have been dry growing seasons in Brazil, Argentina, the U.S. Midwest, Kazahkstan, Ukraine and Russia.
"This is really the third time in five years that we have had soaring grain prices," says Don Coxe, a BMO Strategy Advisor. "It is sinking in on global planners and what is sinking in is the notion that maybe we are closer to the edge globally than we thought."
Easing the U.S. ethanol mandate for gasoline would help because Coxe estimates between 45 and 50 per cent of the drought reduced corn crop will be used in ethanol production. The European Union also uses edible oils in biodiesel.
"Policies that were devised years ago at a time of grain surpluses and to insulate themselves against OPEC (Organization of Petroleum Exporting Countries), these policies are coming back to hit us," says Coxe.
He does not think there will be any change in the U.S. renewable fuel mandate during the U.S. Presidential election campaign.