Bio-Fuel Profoundly Impacted Commodity Values

VANCOUVER - May 1/07 - SNS -- Surging bio-energy demand has had a profound impact on primary agricultural commodity markets thus far during the 2006-08 marketing year. Rapidly escalating prices for fuel stocks used by that sector spilled over into other commodities in an effort to avoid losing land to grains and oilseeds most widely used to make ethanol and diesel.

The effect was most obvious in the intention by western Canadian farmers to slash land in summerfallow from 10.71 million to 8.045 million acres this year. Canola was the biggest beneficiary of the change, with western Canadian canola area possibly jumping from 13.28 to 14.83 million acres.

Last fall, there was real concern in the pulse industry that it would lose considerable land to corn, canola and other crops used by the bio-energy sector. Spreads between most specialty crops and major grains and oilseeds widened considerably in favor of the latter group. Markets understood the supply implications of the situation and responded.

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