The increasing use of biofuels to tackle global warming is having a dramatic impact on global commodity markets, the head of the Chicago Mercantile Exchange said Thursday. The recent surge in crude oil and wheat prices to record highs pointed to a transformation of commodity markets said Craig Donohue, chief executive of the world's largest financial exchange.
"This is an entirely new market in commodities. We see a tremendous convergence now between (soft) commodities and energy with many economies becoming very ethanol based," he told reporters during a visit to Tokyo. The International Monetary Fund warned this week that an increasing global reliance on grain as a source of fuel could drive up food prices in poor countries with "serious implications."
The United States overtook Brazil in 2005 to become the world's largest producer of ethanol while the European Union is the largest biodiesel producer, it noted. China and India, thirsty for energy to fuel their rapid economic expansion, also plan to ramp up biofuel production, which experts say could aggravate water and food shortages.