16 January 2007

2 minute read

North America

Weekly Purcell Agricultural Commodity Market Report Mike Roberts Agricultural and Applied Economics Virginia Tech

Since the markets are closed due to the Martin Luther King Holiday the report is dedicated to the following market thoughts:

Biofuels:

Biofuel markets are going to be the major influencer in global agricultural markets in 2007. Grains and other seedstock growers should expect upward movement in prices while livestock producers are urged to look into ways to be the most efficient you can be. Countries are looking for ways to break their reliance on crude oil from the Middle East, slow global warming, and decrease their dependence on traditional fossil fuels for new biofuel factories that are expected to start coming on line around the world. These biofuels factories will utilize the likes of sugar, corn, soybeans, rapeseed, and palm oil.

Ethanol:

Ethanol demand is expected to increase by 25% per year for the next two years. Caution is advised here in the outlook for ethanol primarily due to concerns of more capacity taking shape in the near term. In 2006 alone 1 billion gallons of ethanol capacity were added to the US market. This is expected to continue and more than double over the next 24 months in the currently favorable legislative atmosphere. Current capacity is near 5.4 billion gallons and new capacity is expected to be somewhere near 11-12 billion gallons.

Work in Progress:

A colleague and I are investigating the feasibility of locating a biodiesel production plant in a bio-fuels seedstock production area. i.e., What would it cost and would it be worth it to build a bio-diesel plant in a soybean or canola producing area? Our idea is to research the accompanying questions and then develop a template that could be accessed on line to help those interested in developing such a plant determine if the venture would “pay out.”

More will come out in the next few months.

Hope your week is profitable.

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