President Obama’s support for the US ethanol industry should flow through to Australian farmers by boosting world grain prices.

That's because US demand for corn, the prime US feedstock for ethanol, should set a floor in the price for coarse grains.

This, in turn, will spill over into the wheat market.

With crude oil prices currently at less than $US35 a barrel, it is difficult for the US grain-based ethanol to be competitive on the open market.

But US ethanol-use mandates will ensure plants are kept running.

Mr Obama, a staunch supporter of the ethanol industry, is set to leave ethanol mandates established by George W Bush in place.

This is in spite of the US industry coming under increasing criticism from detractors on economic and environmental grounds.

Support from Mr Obama comes at a crucial time for the US ethanol industry.

It's been struggling over recent years, with plants shutting down and companies going out of business due to uncertainty.

In Australia, not all farming groups are pleased by the development, which will place positive pressure on commodity prices.

The National Farmers Federation is against the continuation of the US ethanol mandate.

It says the open market forces should prevail.

And Australian feed grain users would love to see one of their competitors for grain out of the equation.

Mr Obama’s support for ethanol is fitting for a senator from Midwestern Illinois, the second-largest corn producing state in the US.

He has strong links to the ethanol industry and promotes the fuel as a means for the US to become energy independent and so reduce reliance on unstable oil-producing nations.

Ethanol’s supposed environmental credentials are another reason quoted by the Obama camp.

Mr Obama differed sharply from his Republican rival John McCain who was an advocate of free trade.