Biofuels Will be a Major Factor in the Economy, Say Economists
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Growing biofuels, and the impact they will have on food costs, will be a major factor in the global economy as the world recovers from the recession, say economists.
Strength in developing nations and fuel prices are two of the factors leading the world out of recession. According to the National Australia Bank – which recently made a presentation at the Outlook 2010 conference in London, England, the worst of the global recession has passed, and biofuel producers can expect a growth rate of as much as five per cent in the next couple of years.
“The worst is behind us, but any sudden increase in growth is due to the stock cycle and other time limited policy measures,” said Tom Vosa, head of market economics with the bank. “It seems too early to call a firm recovery trend just yet.
“Having fallen by 4.9 per cent in 2009, we only expect 0.9 per cent growth in 2010. Consensus is currently at 1.2 per cent. The recovery will be extremely uneven. Growth in the first quarter could even be negative, especially after extremely bad weather in the first two months. Having fallen back sharply in 2009, global food prices rose in the early months of 2010 due to an extremely harsh winter in the northern hemisphere. The fall in dairy prices might already be over and oils and fats prices have still been rising.”
In the future, said Vosa, growth will be led by emerging economies, such as biofuels.
“The era of cheap food looks to be over, aided by a growing population, the needs of biofuel and a weak US dollar,” he said. “The role of China and India in raising prices is harder to prove as both are food exporters, so should not have led to higher prices. The rate of return in agriculture needs to be sufficient to generate the required investment in expanding the acreage under production. With Latin America and Russia long-term projects (if ever) than Europe and the US become more likely sources of land supply, which will support land prices in both regions. If developing economies grow faster than advanced ones, then we could see increased demand for cereals and vegetables globally, as meat is still too expensive.”
According to Vosa, the world is running out of farmland for food growth.
“Although the world’s population doubled between 1960 and 2000 and levels of nutrition improved markedly, the prices of rice, wheat and maize -the world’s major food staples- fell by around 60 per cent,” said Vosa. ”Looking forward, we expect global demand for food to slow, reflecting not only a peaking in global population growth since the late 1960s but also the fact that a rising proportion of the world’s population has already reached fairly high levels of food consumption.”
