Biofuels Policy Will Drive Grain Prices in 2012

AG Web
February 28, 2012
By: Jeanne Bernick, Top Producer Editor

As producers make their marketing plans ahead of spring planting, they should keep an eye on three key drivers of commodity prices: global economic growth, the weakening of the dollar and biofuels policy.

"We have reached a new plateau grain markets and everyone is trying to figure out the average price for corn," noted William Lapp, grain economist with Advanced Economic Solutions. Lapp spoke at the Bayer CropScience Ag Issues Forum in Nashville, Tenn., ahead of the 2012 Commodity Classic. "The reality is there is only so much corn and different interests are going to fight for it."

Lapp believes biofuels policy, particularly regarding the ethanol mandate, could be the single biggest driver for grain prices. He projects a shortfall to meet the cellulosic ethanol mandate, which may cause the mandate to be rejected by policymakers in the future. Add to that the ethanol blend wall with E15 and biodiesel mandate adjustments, and the grain industry could be in for some significant market swings.

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