Australia's grain industry, putting drought behind it, is set for better times thanks to a global surge in biofuel use that will drive demand for grains, government and industry analysts said this week.
Innovations by farmers to see them through the hard times now put them in a good position to cash in on the biofuels boom, said Australian Bureau of Agricultural and Resource Economics grains analyst Vince O'Donnell. "We are entering a new era in the world grains industry, driven by biofuels," he told the government body's annual forecast conference.
"It is a new and exciting period." Productivity gains, such as the use of satellite technology for precision ploughing of fields, have been driven partly by the need to survive through drought. With Australia's worst drought in a century showing signs of breaking, the bureau forecast this week that the wheat crop would rebound to a near-record 24.98 million tonnes in 2007/08 after being slashed by 60 percent to less than 10 million in 2006/07.
The new crop could even exceed 25 million tonnes to challenge the record of 26.1 million tonnes, O'Donnell told the conference, though growers representative body Grains Council of Australia said on Thursday the forecast was optimistic. Still, for the first time in a decade, medium-term wheat prices are seen rising and output expanding as demand for ethanol grows.
Governments and oil companies world-wide are seeking alternative fuel sources and US President George W. Bush has made it clear he supports a major shift towards biofuels. Farmers in the United States are raising production of maize, now a lucrative material for biofuel production. Soaring US demand for ethanol produced from crops like maize and sugar cane has sent maize prices to their highest level in a decade.
Consumption of corn in the United States for ethanol is estimated to increase by 25 million tonnes in 2007 to 80 million tonnes, to take around 30 percent of the crop.