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Grain Volatility To Stay High In 2010

Prices of agricultural commodities will remain volatile in 2010 due to supply constraints, volatile shipping costs and a constant demand pull from new demand sources like biofuels, North American Export Grain Association president and CEO Gary Martin said Nov. 3.

“In the last three years, volatility in this industry has increased and it’s likely to stay at this new plateau of volatility,” Martin said on the sidelines of the Global Soybean and Grain Transport conference.

Rising demand for raw materials from developing countries, most notably China, helped to drive grain and soybean prices to record highs last year. Prices retreated in 2009 amid the global economic slump but have since recovered somewhat.

Corn futures on the Chicago Board of Trade hit a record high of $7.65 per bushel last year before falling below $3 last December. This year, corn has traded in an historically wide range between about $3 and $4.50.

Soybeans peaked at $16.63 a bushel last year, plunged below $8 in December, and have traded between about $8.40 and $12.90 this year.

The type of volatility was expected to continue next year amid tight supplies of some agricultural commodities like soybeans and volatile shipping costs, Martin said.

Consistently climbing demand from biofuels makers, which process corn and soybean oil into renewable fuels, could also cause higher volatility in prices as supplies are challenged to keep up with demand.

Martin said his outlook for the agricultural sector as a whole was “positive but not too bullish” as a growing global population will continue to fuel demand for food, but logistical inefficiencies and international trade barriers could restrict trade.

“We’ve actually gone backwards if you look at some of the restrictions – the political restrictions, the technical restrictions – on trade that are occurring in today’s marketplace,” Martin said.

“I’d be much more bullish if we saw an expanded facilitation of trade through official policies, official actions, which includes tariff as well as non-tariff trade barriers,” he said.

U. S. President Barack Obama said on Nov. 3 the United States and the European Union had agreed on the need to avoid trade protectionism. Obama was speaking to reporters after White House talks with leaders of the EU.

“We’ve reaffirmed our commitment to strong sustained economic growth … and reaffirmed our intent to continue to expand trade and resist protectionist measures between the United States and the European Union,” Obama said.

U. S. soybean exports to the European Union are currently at a virtual standstill after several shipments were refused entry this year due to the presence of trace amounts of unapproved GMO corn varieties, a violation of the bloc’s zero-tolerance policy.

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Karl Plume is a reporter for Reuters.

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