US biofuel mandates, Chinese demand boost food prices – executive

27 September 2011 16:32  [Source: ICIS news]

CHICAGO (ICIS)--US government mandates for biofuel production and rising Chinese demand for food are pushing food prices higher around the world, the top executive of the CME Group said on Tuesday.

"Unfavourable weather in key growing areas and monetary exchange rates have also contributed to rising food costs," said CME CEO Craig Donohue during the 2011 World Fertilizer Conference hosted by The Fertilizer Institute (TFI).

Donohue's remarks countered frequent arguments that commodity trading speculators were the cause for higher food prices.

"Blaming futures markets for higher food and energy costs is like blaming Paul Revere for the American Revolution," Donohue said.

The current US ethanol production mandate requires about 40% of the US corn crop, which is 15% of global corn production.

"Support for ethanol and other biofuels in Washington, DC, by vested interests is very strong and changes in policy, such as elimination of the 54-cent/gal tariff on Brazilian ethanol, are unlikely to come in the near future," Donohue said.

The CME Group is the world's leading derivatives marketplace. In 2009, it facilitated the trading of 2.6bn futures and options contracts reflecting $813,000bn (€602,000bn) in value.

($1 = €0.74)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Frank Zaworski
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