Food prices to rise for years, biofuel firms say

By David Brough

LONDON (Reuters) - Staple food prices will rise for some years, but should eventually fall to historical averages as harvests increase, biofuel company executives said on Thursday.

Soaring demand for better quality food from rapidly industrializing emerging markets such as China, supply shortages, increased demand for biofuels, and a surging appetite for food commodities by investment funds, have combined to push prices of basic foods higher and higher in recent months.

Stephane Delodder, managing partner of Netherlands-based consultancy iFuel Corporate Advisory, told a conference the problem of rising food prices would persist for some years.

Market forces should eventually help rebalance supply and demand, especially in markets which are not highly regulated, but this could take some time.

"(It could be) a few years at most before the situation returns to normal," Delodder said.

He said grains and oilseed futures markets, which have corrected down recently after meteoric rises, may already be signaling that supply will rise as farmers raise plantings.

U.S. soybean prices fell sharply this week after a U.S. government forecast that American farmers would plant 18 percent more of the oilseed in the spring, at the expense of last year's superstar of the food commodity markets, corn (maize).

The rush to farm more soy, used to make animal feed, cooking oil and the renewable fuel biodiesel, follows record highs this year on Chicago Board of Trade futures.

The decline in soybeans turned the spotlight back to corn, which was seeded in the most number of acres in the United States last year since 1944 amid the strong demand from the ethanol biofuel industry.

BIOFUELS

Delodder said that as farmers planted more crops in response to rising prices, prices were likely to revert eventually to their historical mean levels:

"Prices tend to go back to their long-term averages."

Victor Deike, biofuels development manager with Belgium-based Novus Europe, an animal nutrition company, agreed:

"Big harvests would put less pressure on prices."

But he said food production faced structural problems and climate change could drag on food production, adding to upward price pressure.