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NEW YORK, Aug. 20 /PRNewswire/ -- The search for alternative fuels is
often blamed for the high cost of food but, according to a new Rabobank
podcast, it is just one of many factors. In the podcast, analysts with
Rabobank Food & Agribusiness Research and Advisory (FAR) department discuss
the food vs. fuel debate. (The full podcast is available online at
www.RabobankAmerica.com/Rabocast.)
"First, food versus fuel is a handy sound bite," said FAR Executive
Director Karol Aure-Flynn. "But, the fallacy of the headline is that there is
a direct competition between the two; that it's either or. The reality is that
strong global economic growth has changed the demand equation for U.S.
commodities. (This information begins at 1:10 in the podcast.)
The depreciation of the U.S. dollar, soaring energy costs and changing
trade policies are also contributing to the cost of commodities, which in turn
is raising the cost of food -- it's not just fuel, it's a combination of all
of these factors.
"We're seeing ourselves at a unique point in history where a lot of these
factors have collided at the same time to create this food vs. fuel debate,"
said FAR Vice President Michael Whitehead. (This information begins at 2:02 in
the podcast.)
These factors have included the upward impact on food demand of growing
population and rising incomes, an increasing emphasis on food security, an
uncertain global trading environment, and disruptions to some major global
suppliers, such as droughts in Australia.
On the fuel side, many are seeking long-term sustainable ways to reduce
reliance on foreign oils. Additionally, the long term availability of other
fuel sources, such as coal, may also need close consideration. "The pace is
heating up on finding sustainable alternatives to these energies and biofuels
really are at the forefront of the debate," said Whitehead. (This information
begins at 3:14 in the podcast.)
The combined factors have raised food prices nearly 6 percent and could
see them go higher into 2009. This has led many to believe that prices are
increasing faster than they should, given the record prices that farmers are
receiving for their commodities. However, many consumers are unaware that
around 19 percent of the retail price goes to the farmer; the other 81 percent
goes toward food processing, transportation and service.
"Farmers' profitability doesn't change retail prices. And farmers'
profitability isn't guaranteed by high grain prices. The same factors that are
lifting grain prices are lifting production costs," said Aure-Flynn. "So, yes,
the farm price index is at 162 percent of what it was 1990-1992, but at the
same time the price index measuring what farmers pay -- for services, farm
wages -- is 189 percent of base." (This information begins at 4:08 in the
podcast.)
Moving forward, any changes in the factors supporting higher input costs
and higher prices -- such as change in demand, exchange rates, or ethanol
policies -- could change the agricultural industry. Additionally, the food
versus fuel debate will play a key role in the upcoming U.S. Presidential
election, with the policies of both candidates on areas such as biofuels,
trade and energy being closely watched not just by the agricultural industry
but by food buying consumers.
"The future in this debate, with the new administration coming in, will be
like a ride on a bi-plane, it will be bumpy, but fascinating as well," said
Whitehead. (This information begins at 9:26 in the podcast.)
Note to reporters and editors: See release, "Rabobank Predicts Strong
Growth in Worldwide Food and Agriculture Industry," which discusses similar
subjects. Information is available online at www.rabobankamerica.com/news
The premier bank to the global food and agriculture industry, Rabobank is
a global financial services leader providing institutional and retail banking
and agricultural finance solutions in key markets around the world. From its
century-old roots in the Netherlands, Rabobank has grown into one of the 25
largest banks worldwide, with over $800 billion in total assets and operations
in over 35 countries. Rabobank is the only private bank in the world with a
triple A credit rating from both Standard & Poor's and Moody's, and is ranked
among the world's safest banks. In the Americas, Rabobank
(www.RabobankAmerica.com) is a leading financial partner to the entire
American food and agribusiness industry and is a specialist in sophisticated,
customer-driven solutions in the Global Financial Markets and Corporate
Finance arenas. Rabobank also provides retail and commercial banking services
in California; leasing; and real estate lending, operating loans, input
financing and crop insurance to American agricultural producers, input
suppliers and agricultural manufacturers.
SOURCE Rabobank
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