Cereal prices remain high due to biofuel boom

An increase in the demand for biofuel will cause an increase in demand for cereals, maintaining the relatively high raw material prices, the European Commission said today.

In a new report, Commission analysts said the expansion of domestic consumption and cereal exports mean supply will be able to meet demand in the medium-term between now and 2014.
Current high cereal prices are due to the low cereal harvest in 2006/2007, and the rise in demand during this period, the report stated. The biofuel boom in the US has also helped keep the cereal prices high, the report says.

However, the Commission suggests cereal prices will decline over the medium term, despite price hikes due to adverse weather, as overall production is increasing faster than demand.

The European Commission predicts total cereal consumption to be 277.8m tonnes by 2014, rising from 250.4m tonnes in 2006. This follows the increase in cereals consumption for bioenergy from 3m tonnes in 2006 to 19.3mio tonnes in 2014.

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