The EU admits it made a mistake...
Others are coming to the same conclusion...
But this sudden attack of common sense is unlikely to send food prices falling... instead they’re likely to go up even more.
It means there’ll be a lot of money to be made in this trend...
Placing targets for bio-fuels is one the biggest blunders the EU has ever made.
Really, it defies belief.
How we can justify burning crops for fuel when there’s already a critical shortage of food is beyond me.
Now though, it looks like some politicians may be starting to see the error of their ways.
But it’s too little, too late...
More gains ahead in food
The Commodity Futures Trading Commission (CFTC) is scheduled to meet farmers and traders in the US tomorrow to discuss the jump in agricultural commodities prices.
It will say speculation from hedge funds and pension funds is NOT responsible for driving agricultural commodities' prices to record highs. It will argue that prices have been driven by robust demand, weather-related supply disruptions, the lowest inventories in 30 years, government trade restrictions and the impact of the weaker US dollar.
CFTC commissioner Bart Chilton said: “At this time there is not a correlation between excessive speculative activity and prices… market fundamentals appear to be functioning appropriately.”
It’s almost trendy to slam hedge funds these days – and the blame for soaring food prices has been placed firmly at their door.
The regulator’s data appears to suggest otherwise, however, which means there are more gains ahead in food.
I believe this is the case even though there may actually be signs that the EU will retreat somewhat from its bio-fuels target.
A report in the Guardian on Saturday suggested that The European Commission was backing away from its insistence on imposing a compulsory 10% quota of bio-fuels in all petrol and diesel by 2020.
“The target is now secondary,” a commission official told the newspaper, adding that high standards of “sustainability” being drafted for bio-fuels sourcing and manufacture would make it impossible for the target to be met.
Food prices will get ever more expensive
This is good news. Sense is prevailing (I hope).
However, I believe targets won’t be scrapped in the US because there are so many vested interests in the ethanol industry – and powerful figures are involved. Don’t underestimate the power of the US ethanol lobby.
The rush to bio-fuels is a global phenomenon - numerous countries have set standards or targets...
The EU has set a goal of 5.75% of motor fuel use from bio-fuels by 2010. The US has mandated the use of 28.4 billion litres of bio-fuels for transportation by 2012. Brazil will require that all diesel oil contain 2% bio-diesel this year and 5% by 2013, and Thailand required 10% ethanol in all gasoline starting in 2007. India mandates a 5% ethanol blend in nine states, and China is requiring a 10% ethanol blend in five provinces.
The World Bank recently put the blame for food inflation firmly at the door of bio-fuels. Despite the possibility that the EU may not blindly focus their attention on a silly target, I do not think that bio-fuel blending will be scrapped here either.
And not only is land that was previously used to grow food being used to grow fuel, but there are 75 million new mouths to feed every single year.
It all means there will be a lot of money to be made in foodstuffs in the next few years.
Regards,
Garry White
Editor Smart Commodities UK
P.S. In my resource investment advisory, I list five stocks that carry my highest possible rating for safety and large capital gains - one of which directly benefits the run up in agricultural prices. I think these investments should be the core of your portfolio for years to come. You can learn more about a Smart Commodities UK subscription here.
