MANHATTAN, Kan.—New research from Kansas State University suggests biofuel production has facilitated higher prices through greater demand for corn. In fact, they predict 40% of the U.S. corn output will likely be used for ethanol in 2011.
The world's population has increased 10% to 12% over the past decade, driving up the demand and cost for food commodities. According the a recent World Bank food pricing index, prices of food commodities increased 30% to 35% over 2010.
Agriculture ministers from the G20 countries on June 23 agreed to an action plan aimed at stabilizing food prices and increasing food production that calls for establishing an international information sharing scheme to ensure transparency in agricultural markets.
Sean Fox, professor of agricultural economics, said the greater emphasis on corn has caused decreases in wheat acreage. Wheat stocks were lower worldwide and caused greater volatility in prices. Production concerns have been raised in the United States because of drought in the southern Plains and too much moisture in the northern Plains. Production concerns also are occurring worldwide because of equally unpredictable weather in China, France and Germany.
"Higher oil prices also contribute to increased demand for ethanol, which drives up the price of corn. This, in turn, brings up cereal prices as well," he said.
U.S. and European consumers spend about 19% of their incomes on food, compared to people in lower-income countries, such as in the Middle East and sub-Saharan Africa, who spend on average about 70% of their incomes to feed their families.
“A 15% increase in wheat prices or corn prices is a major issue for them," Fox said. "Higher grain prices contribute to an increase in global poverty. It's a major issue in some countries."
