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In recent years, rising prices for agricultural and energy commodities have heightened interest in the fundamental "long" forces driving these markets. This report presents bio-era's analysis of the most important of these forces, and how they may impact pricing in these markets going forward.

It is a given that future prices for commodities and future pricing relationships between commodity markets are highly uncertain. This report presents bio-era's view of the factors most likely to significantly influence these markets in coming years, paying special attention to how these factors could influence price relationships between animal fat and vegetable oil markets in North America.

We draw several conclusions from our analysis:

  • Upward price pressure on petroleum products is likely to continue for the next 3-5 years, so long as global economic growth remains positive.

  • Soft agricultural commodities that are convertible into petroleum product substitutes are likely to price at or above their btu equivalence with oil throughout this period.

  • Biofuel production assets will operate under challenging and highly competitive conditions during this period, given the tendency of their feedstock to price at or above btu equivalence with oil products.

  • Biofuel production technologies and processes with feedstock flexibility and higher conversion efficiencies should enjoy strong competitive advantages during this period.