World Bank: Biofuels lift food prices 75 percent

Demand for biofuels in Europe and the United States has forced up food prices 75 percent around the world, according to a World Bank report that was leaked and published in The Guardian newspaper on Friday.

The number stands in sharp contrast to the 3 percent contribution to higher food pricing estimated by the United States Department of Agriculture.

Meanwhile, a study commissioned by food manufacturers pegs the contribution of biofuels on food prices at between 25 percent and 35 percent. (Click here for PDF).

The reports will surely heat up the debate on biofuels policy one week before the scheduled G8 meeting in Japan. Both the U.S. and Europe have biofuels mandates to lessen dependence on imported fossil fuels.

The World Bank argues that these policies have distorted the market for grains in three ways, according to The Guardian. First, crops that would have been sold for food have been diverted for biofuels production. Second, land is now being used for fuels rather than food. And third, the mandates have set off speculation in financial markets

"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 Guardian quoted the report as saying.

The World Bank earlier this year issued a warning on biofuels and blamed them, in part, for food crises in developing countries. The Guardian said that the food impact report was delayed for political reasons, specifically not to discredit the Bush Administration's strong support for biofuels, particularly corn-based ethanol.

The wide disparity in analysis among the different parties is hard to decipher.

At the very least, it demonstrates the public relations and political battles we can expect over the coming years between supporters and detractors of biofuels.

Grist.org parses the political angles of the report in its post on Saturday.

A non-political research organization, New Energy Finance, published an analysis early this year that found a relatively small impact on price from biofuels policy.

Overall, it found grain prices went up about 8 percent because of biofuels, with corn affected more heavily because of U.S. policy. From the report:

In grains, during the period from 2004 to April 2008, global dollar prices increased by an average of 168 percent. The rising price of oil accounts for an increase of 32.5 percent and other inputs--such as land and labor costs--contributed 7.4 percent. Dollar depreciation accounts for a further 17.9 percent. Supply and demand imbalances account for the remaining 57.7 percent, with biofuels responsible for up to an 8.1 percent increase in global average grain prices (the impact on U.S. corn was clearly above average). The biggest issues were the failure to improve yields to compensate for global population growth, along with the failure of the Australian harvest.

Biofuels Digest has more background on the food versus fuel debate.

Update at 8:00 a.m. PT on July 8: The Wall Street Journal found that the supposedly secret report was actually a position paper from April. A final paper to be published later this week will likely conclude that the contribution of biofuels on food prices will be lower than 75 percent. See here.

[computerlegalexperts.com]

Horsefeathers. I don't see the oil exporters being hit over the head for high fuel prices, which has increased the costs of manufacturing and transportation. If oil was cheap, then the use of ethanol would drastically be cut or even disappear. I own a flex-fuel vehicle and ethanol is a boon if:

1. You like paying 1/3rd less than the price of gasoline.
2. Fuel tax revenues as compared to a Prius (vs. a Mecury Mountaineer FFV) is 350% more and 10-20% more than a comaparable standard internal combution engine.
3. Cleaner emissions.
4. Telling Hugo Chavez and the other two-bit dicators where to get off.
5. Patriotism at its best. Whom would you rather turn your dollar over to? The US farmer or Hugo Chavez?

Darwin is also at work, survival of the fittest. Let all of the Arab States, China, India and all of these "emerging countries" choke on the oil they are consuming. Energy independence before saving the world. It is about time we thought about the US first and not every nation with their hand-out. this is a classic case of the Laffer Curve. Since there isn't any money on top (we're tapped-out), there isn't anything flowing down-hill.

Screw the rest of the world. Let's tighten our belts and use E-85 as a stop-gap, until we move into hydrogen powered vehicles.

[tech_crazy]

Get your head out of your a**. The US needs a REAL energy policy, NOW! And this "rest of the world" attitude needs to go. Until the US is dependent on the world for its energy, deal with it.

[razor.rodriguez]

Has anyone even thought of using tobacco for ethanol? a) it's not a food stock (however the leftover can be used to make high-protein content feed for cattle); b) low grade tobacco can grow practically anywhere; c) people can stop smoking without hurting the tobacco growers. It's a win-win!!! There's a few studies out there that show that tobacco is a superior source of ethanol, producing more per ton than corn or cellulose. (see http://home.ktc.com/bdrake/altengy.html for more info)

[jemiller0]

I suppose the price of oil has nothing to do with it??? Is this the same World Bank that forced Bolivia to privatize water water supply even banning the collection of rain water (until the people revolted)? I give them NO CREDIBILITY. They're just looking out for the interests of big oil.

[SeizeCTRL]

I recently picked up the book "Everything You Know Is A Lie" and there was some crazy stuff on the World Bank and how they force countries into doing things like what you mentioned.

I'm with you though, this has big oil propaganda all over it.

[amadensor]

Flex fuel is only cheaper because of government subsidies. Look up what your local and federal subsidies are where you live, and add that to the price of a gallon. It is usually between 50 and 75 cents per gallon.

At the true price it is not such a good deal.

[tech_crazy]

Get your head out of your a**. The US needs a REAL energy policy, NOW! And this "rest of the world" attitude needs to go. Until the US is dependent on the world for its energy, deal with it.
And before you say anything, I am right here, paying almost 5 bucks for a gallon of gas and almost the same for a loaf of bread.

[Commander_Spock]

You may have forgotten to add (and soon it will be "almost 5 bucks for a gallon of" milk too. Huh!

[Ted K]

Just stop using so much energy. Can you imagine if everyone in the world would use as much energy as the average American does. We would be up to $1000 a gallon. The gas guzzling private vehicle is a big part of the problem in the USA. Europeans have been dealing with high gas prices for generations, as their high gas taxes support their efficient public transit networks. Public transit using electricity obtained from nuclear power stations can also help a great deal towards self-sufficiency.

[SeizeCTRL]

Not everyone lives in big cities with public transit... if every place was like San Francisco then that might be an option, but a big portion of the US is rural and last time I checked there were no buses, trains and trolleys going out to pick up farmers so they could take a nice quick ride to the market and back.

Nevada has the right idea with the state funded Hydrogen fueling stations powered by solar... If we took the money we have spent for the war in Iraq, we could have easily converted everyone's car to hydrogen and put in place the infrastructure of fueling stations. Then there would be no need to be over in the middle east!

[Commander_Spock]

Re: "If we took the money we have spent for the war in Iraq, we could have easily converted everyone's car to hydrogen and put in place the infrastructure of fueling stations. Then there would be no need to be over in the middle east!" Are you forgetting that it was the "invasion" of Kuwait by Iraq that got American Forces in the Middle East during the early nineties and in the last few years American Fighting Forces went to Afghanistan following the 9/11 attack on the United States of America and 79 other countries; and, before all of these were the 200 or more members of the US Armed Forces who lost their lives in Lebanon. How conveniently we forget our history about what got the world into what was experienced from 1939-1945. Yep, sit back and allow others to attack us first (turn the other "cheek" and receive another slap there too). Huh!

[suyts]

LOL.......Since when is "The Guardian" a credible source of any information? Just as well quote the "Inquirer".

[dcase99]

Horsefeathers to your Horsefeathers. I was just in South Dakota and Ethanol prices were $3.99 a gallon where gas prices are $4.09 a gallon. With Ethanol %30 less efficient in mileage, Ethanol actually costs M-O-R-E!
Also with the price of corn going up, 2 Ethanol plants have been mothballed because they cannot compete with gas.

[galacticcruiser]

suyts: I take it you have never read the Guardian or know what it is -- it is kinda like UK's NYTimes, or Tribune etc...

[SLSB]

I'm with the National Biodiesel Board in the U.S. and I wanted to make sure that your publication also prints the fact that the World Bank has refuted the Guardian Article on Biofuels that was referenced in the article Biofuels to Blame for High Food Prices. The Guardian had it wrong. So says the Wall Street Journal, which reports today that the study blaming biofuels for the increase in food prices was nothing more than a working paper meant to contribute to a World Bank position paper on food prices. The World Bank is now on record refuting that this unfinished paper reflects its position on biofuels.

[mgchandrakanth]

How can the food prices all over the world increase by 75% if the demand for biofuels in US and EU increase? This all depends upon the feed stock. This is not true at least in India. Such generalizations should not be made without knowing the ground truth and reality. India never uses edible oil as feed stock. India has been advocating non edible oil seed trees such as Pongamia, Jatropha, Simarouba, Castor, Neem, Madhuca,.... as feed stock, that too the seeds. And these crops are grown on waste lands, on bunds etc which do not affect the food crop area or prices. Such statements in fact harm the biofuel program in India and perhaps in other developing countries. Please let us appreciate that US and/or EU is not the entire world. Neither they are representative samples of the problems all round the world nor their solutions are applicable to problems round the globe. Please do not take out some small phenomenon in the US and EU and apply to the whole world.