Robert Pore's Ag Blog

Rome – Cereal prices, particularly for wheat and maize, have reached levels not seen for a decade, according to FAO’s latest Food Outlook report.

Poor harvests in key producing countries and a fast-growing demand for biofuel production have driven up grain prices, while supply constraints have also dominated the rice economy, the report said.

Food import bill rises

Global expenditures on imported foodstuffs in 2006 could reach a historic high of US$374 billion, over 2 percent more than the previous year’s level. Import bills for developing countries are anticipated to rise by almost 5 percent from 2005, mainly as a result of price increases rather than an increase in the actual volume of food imports.

FAO anticipates that many countries will reduce purchases, not always in response to improved domestic supplies but rather because of high international prices. Moreover, higher energy costs may force many of the poorer developing countries to curtail expenditures on imported staples to sustain their fossil fuel needs.

FAO’s latest forecast of world wheat output in 2006 stands at roughly 592 million tonnes, almost 33 million tonnes, or 5.3 percent, down from 2005. A turnaround is likely, however, with increased winter plantings and good growing conditions raising expectations for a strong rebound in 2007 harvests, FAO said.

World production of coarse grains in 2006 stands at 981 million tonnes, down by 2.1 percent from 2005 but above the average of the past five years. Current strong prices are likely to encourage higher plantings and larger production in 2007, but if industrial use, mainly for ethanol, continues to grow at the current pace, it may take more than one good crop season for prices to retreat significantly from their current highs, the report said.

Typhoons, drought, flooding, diseases and insect attacks have marred prospects for rice crops in 2006, so virtually no growth in global production is anticipated this year. The outlook for 2007 rice crops in the southern hemisphere was also negative, according to the report.

Ripple effect

Oilseed prices have also been on the rise, but gains have been well short of those witnessed for cereals, which is likely to trigger a shift away from oilseed cultivation towards more profitable cereal crops in the coming season. This will exacerbate current imbalances, especially in the vegetable oil markets, which have seen demand rising faster than production, FAO said.

The strength of grain markets also has ripple effects on the meat and dairy sectors. Renewed consumer confidence as a result of reduced animal disease outbreaks had raised the prospect of a rebound in global meat demand, but expectations of high feed costs are threatening to postpone a recovery in livestock and meat production, the report said.

As for dairy products, concerns over feed costs have been overshadowed by negative expectations for milk production in Australia and in the European Union, which together supply a third of world dairy exports. As a result, FAO predicts a tightening of the dairy market and an end to the softening of prices witnessed earlier in 2006. Growth in the output of developing countries, however, is robust at over 4 percent, due mainly to large gains in some countries of Asia and South America.

Sugar production recovers

Global sugar production has recovered to the point that it is expected to outpace demand again after three years of deficit. Production is forecast to increase to 155.5 million tonnes in 2006/07. World sugar prices have largely retreated from the 25-year highs reached in February 2006, but the market remains particularly susceptible to large demand swings and price volatility.

MINNEAPOLIS-ST.PAUL — Highly diverse mixtures of native prairie plant species have emerged as a leader in the quest to identify the best source of biomass for producing sustainable, bio-based fuel to replace petroleum.

A new study led by David Tilman, Regents Professor of Ecology in the University of Minnesota's College of Biological Sciences, shows that mixtures of native perennial grasses and other flowering plants provide more usable energy per acre than corn grain ethanol or soybean biodiesel and are far better for the environment.

"Biofuels made from high-diversity mixtures of prairie plants can reduce global warming by removing carbon dioxide from the atmosphere. Even when grown on infertile soils, they can provide a substantial portion of global energy needs, and leave fertile land for food production," Tilman said.

The findings are published in the Dec. 8 issue of the journal Science and featured on the cover.

Based on 10 years of research at Cedar Creek Natural History Area, the study shows that degraded agricultural land planted with highly diverse mixtures of prairie grasses and other flowering plants produces 238 percent more bioenergy on average, than the same land planted with various single prairie plant species, including monocultures of switchgrass.

Tilman and two colleagues, postdoctoral researcher Jason Hill and research associate Clarence Lehman, estimate that fuel made from this prairie biomass would yield 51 percent more energy per acre than ethanol from corn grown on fertile land. This is because perennial prairie plants require little energy to grow and because all parts of the plant above ground are usable.

Fuels made from prairie biomass are "carbon negative," which means that producing and using them actually reduces the amount of carbon dioxide (a greenhouse gas) in the atmosphere. This is because prairie plants store more carbon in their roots and soil than is released by the fossil fuels needed to grow and convert them into biofuels. Using prairie biomass to make fuel would lead to the long-term removal and storage of from 1.2 to 1.8 U.S. tons of carbon dioxide per acre per year. This net removal of atmospheric carbon dioxide could continue for about 100 years, the researchers estimate.

In contrast, corn ethanol and soybean biodiesel are "carbon positive," meaning they add carbon dioxide to the atmosphere, although less than fossil fuels.

Switchgrass, which is being developed as a perennial bioenergy crop, was one of 16 species in the study. When grown by itself in poor soil, it did not perform better than other single species and gave less than a third of the bioenergy of high-diversity plots.

"Switchgrass is very productive when it's grown like corn in fertile soil with lots of fertilizer, pesticide and energy inputs, but this approach doesn't yield as much energy gain as mixed species in poor soil, nor does it have the same environmental benefits," said Hill.

To date, all biofuels, including cutting-edge nonfood energy crops such as switchgrass, elephant grass, hybrid poplar and hybrid willow, have been produced as monocultures grown primarily in fertile soils.

The researchers estimate that growing mixed prairie grasses on all of the world's degraded land could produce enough bioenergy to replace 13 percent of global petroleum consumption and 19 percent of global electricity consumption.

The practice of using degraded land to grow mixed prairie grasses for biofuels could provide stable production of energy and have additional benefits, such as renewed soil fertility, cleaner ground and surface waters, preservation of wildlife habitats, and recreational opportunities.

There are 30 million acres of grasslands in the U.S. Conservation Reserve Program (CRP), which pays farmers to manage land to benefit the environment. Current CRP regulations do not allow prairie grasses grown on this land to be used for renewable energy, but the U.S. Farm Bill could be revised to accommodate this practice, Tilman added. Doing so would have important economic, environmental and energy security benefits.

"It is time to take biofuels seriously," Tilman said. "We need to accelerate our work on biomass production and its conversion into useful energy sources. Ultimately, this means we need to start paying farmers for all the services they provide society -- for biofuels and for the removal and storage of carbon dioxide."