LONDON (Bloomberg) — Cereal, oilseed and sugar prices will stay close to current levels over the next decade because of surging demand from biofuel producers, the Organisation for Economic Co-operation and a United Nations agency said.Ethanol production from corn is forecast to double between 2006 and 2016 in the US, the Paris-based OECD and the Food and Agriculture Organisation said yesterday in a report. The output of biodiesel made from oilseeds in Europe and ethanol from sugar in Brazil will also soar, they said.

"While higher feedstock prices caused by increased biofuel production benefits feedstock producers, it means extra costs and lower incomes for farmers who need the feedstock to provide animal feed," the agencies said. "Higher commodity prices are a particular concern for net food-importing countries as well as the urban poor."

Governments in the US and Europe are encouraging the use of alternative fuels to limit carbon-dioxide emissions from fossil fuels. The European Union wants biofuels such as ethanol to account for 5.75 percent of transport fuel by 2010 and 10 percent by 2020. President George W. Bush wants to increase US ethanol consumption by raising the target for renewable-fuel use almost fivefold to 35 billion gallons a year by 2017.

The EU's output of biodiesel from oilseeds will climb to 21 million tons from 10 million tons between 2006 and 2016, the OECD and FAO said.