Analysts Take a Look at Biofuel Boom

Business magazine features an in-depth look at the impact of the rush to biofuels on American agriculture and the food industry.

Published on: Aug 27, 2007

The rush to biofuels continues to draw industry reaction and discussion as corn and soybean prices rise, and the makeup of U.S. crop acreage changes. A story posted for the online version of Business Week takes a look at this phenomena discussing how stock prices for different facets of the industry are impacted. The good news is that farmers will see income rise.

For example, overall the shares of ADM are rising due to higher ethanol demand, but for companies whose products rely on corn, Tyson Foods, for example, stock prices are falling. The article notes that trade groups representing beef, chicken and pork producers, along with the Grocery Manufacturers Association have started to voice opposition to taxpayer subsidies for biofuels.

Standard & Poors Equity Research sees the positive correlation between crop prices and farm equipment sales. In addition, the research firm notes that growing ethanol production could continue to boost corn demand, and raise prices for the feedgrain. The organization sees U.S. farm income rising 10% in 2007, and sales of farm machinery could be up that much too.