Biofuels and Food Security

An internal report by the World Bank on the link between biofuels and food prices argues that the drive for biofuels by American and European governments has pushed up food prices by 75% in stark contrast with U.S claims that using crops for fuel, rather than food, has only pushed prices up by 2-3%.

All other factors including rising demand for food from China and India, back-to-back droughts in Australia had only a marginal impact on food prices according to the report.

The reports states that without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate.

The rise in prices has caused food riots in several countries and lead to banning of grain and other food exports. The implication of this report, then, is that crop-derived fuels have been the ultimate cause of food riots, starvation and high prices around the world.

The World Bank’s index of food prices increased 140 percent from January 2002 to February 2008. This increase was caused by a confluence of factors but the most important was the large increase in biofuels production in the U.S and EU. Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate.

The combination of higher energy prices and related increases in fertilizer prices, the decline in the dollar caused food prices to increase by about 35 % from the January 2002 until Feb 2008 and the remaining three quarters of the 140 percent actual increase was due to biofuels.

One-quarter of all the maize and other grain crops grown in the US now ends up as biofuel in cars rather than being used to feed people. Increased biofuel production has increased demand for food crops and been the major cause of the increase in food prices. Allmost all of the increase in global maize production from 2004 to 2007 went for biofuels in the U.S and the net effect was that the increase in global consumption fro the other uses came from stocks. Global maize production increased 55 million tons from 2004 to 2007 according to the USDA and biofuels use in the U.S increased 50 million tons. Global consumption for all other uses increased 33 million tons, which caused global to decline by 27 million tons and maize prices to more than double. Maize for biofuels accounted for 25 percent of U.S production in the 2007/2008 crop year according to the USDA and 11 percent of global production.

The report concluded that rapid income growth in developing countries has not lead to large increases in global grain consumption and was not a major factor responsible for the large grain price increases.