New York, July 6 (PTI): Increased demand for bio-fuels is leading to changes in agricultural markets that could drive up global prices for several farm products, a new study has said.

The Agricultural Outlook 2007-2016, published by the UN Food and Agriculture Organization (FAO) and the Organization for Economic Cooperation and Development (OECD), blames the recent hikes in farm commodity prices on factors such as droughts in wheat-growing regions and low stocks.

Bio-fuels are currently made from such materials as sugar cane, palm oil and maize and, given they can substitute for fossil fuels, hold the potential to substantially reduce greenhouse gas emissions.

But the growing use of these materials is underpinning crop prices and, indirectly through higher animal feed costs, the prices for livestock products, the reports said.

Most bio-fuel policies, it stressed, are new and it is not clear which measures are most effective in achieving the mix of objectives such as lower fossil fuel dependence or less greenhouse gas emissions.

The report forecasts doubling of the annual output of maize-based ethanol in the 2006-2016 decade in the United States and Brazil.

In the European Union the amount of oilseeds used for biofuels is set to grow from just over 10 million tons to 21 million tons over the same period.