Corn Prices Rise Worldwide Due to U.S. Ethanol Policy, FAO Says

The use of corn to make ethanol in the U.S. is helping to lift the grain price worldwide, said Jose Graziano da Silva, the new director general of the United Nations’ Food and Agriculture Organization.

“FAO has been raising its voice against using food to produce bio energy,” Graziano da Silva told 64 agriculture ministers in Berlin yesterday. That’s “especially” the case for corn in the U.S. and oilseeds in Europe, he said.

Corn futures closed at $6.115 a bushel on the Chicago Board of Trade on Jan. 20, almost triple the $2.1175 a bushel for the grain a decade ago. Part of the U.S. corn production is used to make ethanol for blending into gasoline as a fuel while rapeseed is used in Europe to make biodiesel.

“We have been looking into the details of the price, and nowadays there is no doubt that the use of maize in the U.S. for biofuels affects the prices of maize all over the world,” Graziano da Silva said, using another name for corn.

Ethanol production from sugar cane in Brazil accounts for 3 percent of land use and for now doesn’t affect the price of sugar in international markets, according to the FAO director general, who is Brazilian and nominated FAO head as of Jan. 1.

Biofuel production doesn’t necessarily affect food security, particularly when land used for extensive livestock raising is converted to crop use, Graziano da Silva said.

“We finished a study among the Latin American countries and we found only four countries in the region that could expand biofuel production without affecting food security,” Graziano da Silva said. “Those are Argentina, Brazil, Paraguay and Colombia. All of them, they have a huge amount of area under extensive pasture that could be converted into very good lands for biofuel use.”

Biofuels are “a promise,” and technology improvements are still required to “completely change” that, according to Graziano da Silva.

Food security comes first, that is the rule,” the FAO head said. “The position we have right now in FAO is that cereals should not be used for biofuels production.”

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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