In a couple of decades of attending ABARE Outlook conferences, I had never seen anything like it: a forecast that grain prices will rise over the medium term.

The irony is that Australian wheat growers can primarily thank George W Bush and the highly successful subsidy rorters who make up US agriculture. We’re finally getting a cut of the billions US taxpayers and consumers blow on the farm lobby.

The mechanism of this exchange is the US and, to a lesser extent, the European biofuel bandwagon. With the current state of ethanol and biodiesel technology, it’s nothing to do with greenhouse gases or saving the planet. Instead it’s all about security of fuel supply (“ain’t trustin’ no Ay-rabs now we’ve really screwed up the Middle East”) and the power of that farm lobby.

The present small-scale Australian ethanol industry, basically running off by-products, can tell a better environmental story, but the scale being mandated in the US and Europe removes economic and environmental rationalism from the equation

And that means more American mid-west farmers planting more corn for ethanol thanks to the high prices, less wheat for export markets and therefore better international wheat prices.

There are of course some larger economic and ethical issues about food for eating or for fuel. Mexican tortilla price riots are the immediate upshot of the Bush push for ethanol.

Which all points to the fuel industry being only in the kindergarten stage of biofuels – and an arguably unsustainable stage at that. Stage two and three are specific fuel crops (rather than food-for-fuel crops) and a leap in technology to use cellulose and lignin rather than sugar and starches as the feedstock.

Those realities came through the Outlook biofuels session in BP’s presentation and that of Professor Peter Sharp from Sydney University’s Plant Breeding Institute.

In the medium term though, the long-term trend of sliding wheat prices has been stayed. Thanks, George, thanks American farm lobby, a few million from your billions is appreciated. I wonder what the poor people are eating?

Disclosure: Michael Pascoe chaired the Outlook biofuels and grains sessions.

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Peter Fray
Peter Fray
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