Food vs. Fuel: The argument continues... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Food vs. Fuel: The argument continues...

Jun 6, 2008

High food prices bad news for world's poor...
The world's is moving towards a long period of rising food prices, if one were to go by a report released by the United Nations (UN) and the Organisation for Economic Cooperation and Development (OECD). The reports states that while food prices should ease from their recent record peaks, they are expected to average well above the mean of the past decade over the next 10 years.

This should ring alarm bells for policymakers, especially those in developing countries who are net importers of food. The UN-OECD reasons that drought in some of the world's main grain-producing regions (like Australia, which is one of the largest exporter of wheat), changing diets, urbanisation, economic growth and expanding populations, are likely to be the factors that will keep food prices higher in the coming ten years.

  • India offers world food

    In the meanwhile, Reuters has reported a top farm ministry official saying that India will see its rice and wheat output to increase by 2 m tonnes (MT) and over 1 MT next year. As reported, the country already has more than adequate stocks of wheat, and is expected to meet its target to buy 27 MT of rice this year, thereby raising hopes that curbs on grain export will be eased. So, are you taking the government's word this time around, considering that the policies have created a menace in the food market leading to low agriculture yields and sustained higher food prices over the past so many years?

    ...as also for biofuel manufacturers
    Apart from the factors mentioned above, the UN-OECD reports also attributes rising demand for biofuel as another key factor contributing to higher prices over the next 10 years. As per the report, world fuel ethanol production tripled between 2000 and 2007 and is expected to double again between now and 2017 to reach 127 bn litres a year. Bio-diesel production is seen to expand from 11 bn litres a year in 2007 to around 24 bn litres by 2017. The growth in biofuel production adds to demand for grains, oilseeds and sugar, so contributing to higher crop prices.

    Interestingly, one Indian ethanol equipment manufacturer sees itself on the other side of this debate pertaining to 'food versus fuel'. In a recent interaction with us, the company's management maintained that this debate is being exaggerated in many cases. Towards this, it has indicated that the subject is far more complex than has generally been presented since agricultural and export policy and the politics of food availability are factors of far greater importance in rising food prices than diversion of crops to produce clean fuels like ethanol.

  • Read how recent hike in fuel prices with impact oil companies

    One interesting example that management gave was that of a cereal company that makes some variety of corn flakes. The value of corn going into a box of corn flakes was previously estimated to be 2.2 cents. Even if the cost of the corn doubled, it is not likely to have a major impact on the price of the box of cereal. Time to 'munch' some thoughts on this issue?

  • Equitymaster requests your view! Post a comment on "Food vs. Fuel: The argument continues...". Click here!

      

    More Views on News

    These Stocks Have Rallied Over 300% In the Last 12 Months. Is the Rally Justified? (Views On News)

    Nov 12, 2021

    As many as 150 stocks from the BSE 500 index deliver multibagger returns in the past one year.

    Ultimate Guide to Hedging Your Portfolio (Fast Profits Daily)

    Sep 21, 2021

    How can you protect your portfolio in a market crash? Find out in this video.

    Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

    Mar 23, 2021

    Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

    My Latest Stock Recommendation (Fast Profits Daily)

    Oct 9, 2020

    How I picked an exciting stock using trends from both the commodity and equity markets.

    Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

    Jun 1, 2020

    Is too much data hurting your quest for market beating returns?

    More Views on News

    Most Popular

    Infosys vs TCS: Which is Better? (Views On News)

    Nov 26, 2021

    In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

    This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

    Nov 24, 2021

    Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

    6 Popular Stocks that Turned into Penny Stocks (Views On News)

    Nov 27, 2021

    A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

    India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

    Nov 30, 2021

    These 5 companies dominate their sectors with a huge piece of the pie.

    5 Indian Companies Embracing Blockchain Technology (Views On News)

    Nov 23, 2021

    Blockchain adoption in India was slow in the past. Now, the technology is being well received.

    More

    Become A Smarter Investor
    In Just 5 Minutes

    Multibagger Stock Guide 2022
    Get our special report Multibagger Stocks Guide (2022 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARKET STATS