Commodities used to make biofuels may be the top performers this year due to increasing demand from the alternative energy industry and the food sector, said Roland Jansen, CEO of Mother Earth Investment AG.
Demand for biofuels feedstocks such as palm oil, corn and wheat has soared in the past year, after drought cut harvests in countries including Australia and competing demand from the alternative energy, food and livestock industries eroded world inventories. Global corn stockpiles have dropped six years out of seven and wheat inventories are at their lowest in 25 years, according to Coreral, the European cereal trade association.
„We are investing in tropical commodities, that is commodities growing around the Equator, and also in grains, which are the source for ethanol and biodiesel,” Jansen, whose resources fund ained 28% last year, said in an interview from Zurich. Palm oil futures rose to their highest in six weeks today to 1,975 ringgit ($566) a metric ton on the Malaysia Derivatives Exchange, the third straight daily gain.
Prices have risen 27% in the last six months. Corn prices have soared 88% in the past year and reached $4.485 a bushel last week on the Chicago Board of Trade, the highest since June 1996. Corn for May delivery was trading at $4.50 a bushel today. Palm oil is also the commodity of choice for Richard Lucas, a soft-commodities and renewable-energy analyst with London-based Ambrian Partners Ltd.
„It's one of the cheapest vegetable oils and it accounts for 25% of global use of vegetable oils” as it is used in most staple foods, he said, adding that the biodiesel industry was pushing demand up further. „2007 is the year of biodiesel,” said Jansen, whose company, Mother Earth Investment AG manages $100 million. „In Europe, 50% of all new cars sold are diesel cars and consumption worldwide is 90% in Europe. Palm oil, soya oil and canola oil are the basis for these new energies.” (Bloomberg)