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BioEnergy & World Commodity Markets Chris Hurt Purdue University June, 2008 hurtc@purdue

BioEnergy & World Commodity Markets Chris Hurt Purdue University June, 2008 hurtc@purdue.edu. In the past two years PRICES of many basic food commodities have SURGED !. Other Commodities as Well. Rapid World Economic Growth. Weak Dollar. Ethanol.

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BioEnergy & World Commodity Markets Chris Hurt Purdue University June, 2008 hurtc@purdue

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  1. BioEnergy & World Commodity MarketsChris Hurt Purdue UniversityJune, 2008hurtc@purdue.edu Department of Agricultural Economics Purdue University

  2. In the past two years PRICES of many basic food commodities have SURGED! Department of Agricultural Economics Purdue University

  3. Other Commodities as Well Department of Agricultural Economics Purdue University

  4. Rapid World Economic Growth Weak Dollar Ethanol

  5. Department of Agricultural Economics Purdue University

  6. Department of Agricultural Economics Purdue University

  7. Department of Agricultural Economics Purdue University

  8. Has Surging Food Demand in Developing Countries Cause the High Food Commodity Prices? China? India? Department of Agricultural Economics Purdue University

  9. Department of Agricultural Economics Purdue University

  10. Department of Agricultural Economics Purdue University

  11. Department of Agricultural Economics Purdue University

  12. Department of Agricultural Economics Purdue University

  13. Dollar Depreciation Department of Agricultural Economics Purdue University

  14. 45% Depreciation of the Dollar Since 2002 Department of Agricultural Economics Purdue University

  15. 60% Appreciation of the Euro Since 2002 Department of Agricultural Economics Purdue University

  16. Department of Agricultural Economics Purdue University

  17. Department of Agricultural Economics Purdue University

  18. Department of Agricultural Economics Purdue University

  19. Department of Agricultural Economics Purdue University

  20. Department of Agricultural Economics Purdue University

  21. Department of Agricultural Economics Purdue University

  22. Purdue University Estimate Department of Agricultural Economics Purdue University

  23. Importance of World Biofuels Growth Department of Agricultural Economics Purdue University

  24. When stocks get tight we see additional behaviors: • Protection of internal food supplies • Hoarding • Sellers less willing to offer products • Sheer speculative buying behavior in futures and cash markets Department of Agricultural Economics Purdue University

  25. If all food was gone and there was only One Big Mac remaining, WHAT IS ITS AUCTION VALUE? With only one sandwich left, WOULD IT BE A ORDERLY AUCTION? Department of Agricultural Economics Purdue University

  26. Haiti Mexico Philippines Argentina Department of Agricultural Economics Purdue University

  27. Department of Agricultural Economics Purdue University

  28. U.S. % World Exports 2007 Sorghum 76% Corn 66% Soybeans 39% Cotton 37% Wheat 32% Rice 10% Source: FAO, United Nations Department of Agricultural Economics Purdue University

  29. Department of Agricultural Economics Purdue University

  30. Department of Agricultural Economics Purdue University

  31. So: • Surging oil prices and the weak exchange rate of the dollar are primary forces pushing commodity prices higher • Biofuels have been large new demands • High oil and a weak dollar means high corn and soybean prices • Grain prices are now attached to energy markets • In the U.S., one of the factors we have some control over is biofuels policy • A broader examination of how biofuels impacts food and fuel consumers and the environment around the globe is warranted Department of Agricultural Economics Purdue University

  32. 6. U.S. agriculture has been a highly productive sector that has generally been characterized by surplus production and low farm and food prices 7. For nearly a century government policy has generally tried to constrain production, and stimulate demand 8. The ag sector is so highly productive it should be given time to work through the current tight stocks situation and stimulate production. 9. There is a huge amount of promise for fuel production from agricultural lands and forest 10. Much of that research is underway 11. We must not stop continue to support this large body of work 12. But we must balance food and energy Department of Agricultural Economics Purdue University

  33. Department of Agricultural Economics Purdue University

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