With the North American ethanol industry growing so rapidly, the grains industry has found it difficult to keep up with demand for both grain for fuel and grain for livestock.

Canadian International Grains Institute director of feed Dr. Rex Newkirk observes corn prices have been driven up dramatically prompting the livestock industry to move to other ingredients such as byproducts and other grains such as barley which, in turn, has pushed up barley prices causing concern.

Dr. Rex Newkirk-Canadian International Grains Institute

There's always winners and losers in everything that happens and right now we're in a fortunate position where farmers are gaining value out of the grains because of the ethanol industry.

The challenge is that it's happened so quickly that people are concerned about what will happen in the future and will we produce enough in the future for both industries and if not how will that settle out as far as competition between them.

Most of the concern is around the livestock industry, particularly in Canada where we've relied very heavily on barley.

People are seeing these increased prices and they're not sure how long that will last and they may even go up some more in the future.

We also see it internationally.

I spoke with a fellow recently from Japan who buys food barley.

He was certainly expressing concerns about the fact that now they're competing with the ethanol industry indirectly and that their barley prices have gone up and they're worried that this may continue in the future and could make it more difficult for them to use our grain.

Dr. Newkirk says, as buyers see the rising cost of these materials pushing up their input costs, they begin to worry about further increases and whether they should be looking at other types of grains.

He notes, when you have rapid changes, it's always difficult to adjust and there's always fear about what will happen in the future.