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US ethanol law pushes grain prices higher

New York, January 17, 2008

The grain prices are at an all-time high thanks to the new ethanol laws imposed in the United States.

The costs of wheat and canola have shot up to record levels this time. Overnight wheat has been trading at $415 a tonne on the international market, with canola hitting more than $700 a tonne.

According to analysts, the graingrowers in south-west WA, south-west Victoria and parts of New South Wales and Queensland will be best placed to cash in on the sudden price rise.

Market analyst Ron Storey pointed out that the main reason for the surge was the new US law that made it compulsory for fuels to contain ethanol. 'Grain prices are at all-time highs, whether it's wheat and corn and soybeans,' he noted.

'And soybeans has been the big mover in the last month driven partly by the US energy bill that was passed just before Christmas which mandates a level of ethanol and biodiesel into US fuel supplies from 2008 to 2022.

'So what we are doing is starting to have a competition for crops for either food and feed'.

Wool gets costly

Meanwhile, the wool prices too are at a five-year high, and the industry believes they will continue to rise.

Some pundits are tipping prices of more than 1100 cents a kilogram, as overseas buyers battle for tighter wool supplies.

The benchmark eastern market indicator is currently sitting at 1038 cents a kilogram, up 10 cents for the week.

Michael Dekleuver from wool broking company Rodwells, saw the market getting more competitive.

'There's only one negative on the horizon, that's probably the American slow down and how bad that might be,' he says.

'I think that is certainly going to have an effect towards the end of 2008, but in the short-term I can't see that will have any effect at all. Very very positive, I'm certainly very confident of the next six months,' he added.




Tags: US | ethanol | law | grain |

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