Biofuel impacts on food prices

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(Note: See also the BioenergyWiki page on the "food-versus-fuel debate.")

Information about biofuel impacts on food prices.

Contents

Resources

Studies

United Kingdom

  • The Impact of Biofuels on Commodity Prices, Simone Pfuderer and Maria del Castillo, Economics Group, Department for Environment, Food and Rural Affairs, April 2008.
  • The Gallagher Review, especially Chapter 7. Full original report at The Gallagher Review of the indirect effects of biofuels production (PDF file).
    • Conclusions include: "Increasing demand for biofuels contributes to rising prices for some commodities, notably for oil seeds. In the longer term this has a net small but detrimental effect on the poor that may be significant in specific locations. Shorter-term effects are likely to be significantly greater. Lower biofuel targets and directing production onto idle land reduces these negative impacts." (Summary of Chapter 7)

United States

  • ERS "Retail Food Price Outlook: 2008" link Presented by Ephraim Leibtag, Food Markets Branch, Food Economics Division, ERS-USDA. Presented at the 2008 Agricultural Outlook Forum: Energizing Rural America in the Global Marketplace
  • Global Development and Environment Institute, Tufts University. Policy Brief, No. 07-03, Dec. 2007. "Feeding at the Trough: Industrial Livestock Firms Saved $35 billion From Low Feed Prices" By Elanor Starmer and Timothy A. Wise* link
  • Environment. Volume 49. No 9. "The Ripple Effect: Biofuels, Food Security, and the Environment" By Rosamond L. Naylor, Adam J. Liska, Marshall B. Burke, Walter P. Falcon, Joanne C. Gaskell, Scott D. Rozelle, and Kenneth G. Cassman.

International

  • World Bank
    • Rising Food and Fuel Prices – Addressing the Risks to Future Generations HDN and PREM Networks, October 12, 2008.
    • A Note on Rising Food Prices, Donald Mitchell (Lead Economist - Development Prospects Group), Policy Research Working Paper 4682, July 2008.
    • Response to Rising Food Prices. "Rising food prices: Policy options and World Bank response" Released Spring 2008. link - This note is being distributed for information as background to the discussion of recent market developments at the Development Committee meeting. It was prepared by PREM, ARD and DEC, drawing from work across the Bank. Questions/comments should be addressed to Ana Revenga, PRMPR (ext. 89850).

Food and Biofuels Hearings - Washington DC

News

  • Food prices and the influence of biofuels, 15 October 2011 by Columbia Daily Tribune: "While one set of critics argues farm subsidies drive down food prices and contributed to rising rates of obesity, others argue biofuel policies are driving up food prices and contributing to world hunger."
    • "Biofuel policies might do more to raise food prices than farm subsidies do to reduce food prices."
    • "Increasing agricultural production can make it possible to provide more food and more fuel to a growing world, and rising biofuel production is not the only cause of rising food prices."
    • "Reducing or eliminating the RFS could have larger impacts on biofuel production and food prices, and a bill to reduce the RFS when grain stocks are low has been introduced in Congress."
    • "Some have argued that moving to 'second generation' biofuels, such as ethanol made from switchgrass, would alleviate concerns about biofuel production on food prices. According to a recent National Academy of Sciences report, however, such fuels still are not commercially viable."
    • "If oil prices are high enough, biofuel production could continue to increase even if current biofuel policies are removed. That means future food prices might be even more dependent on energy markets than is the case today."[1]
  • Biofuels, Speculation Blamed for Global Food Market Weirdness, 5 October 2011 by Wired: "A new analysis of sudden rises in global food prices puts the blame on biofuel policy and mortgage-meltdown-style speculation, which may have fundamentally changed how food markets function."
    • "'There’s a literature of a hundred-plus articles, saying this might be the cause, or that might be the cause,' said network theorist Yaneer Bar-Yam of the New England Complex Systems Institute. 'We looked quantitatively, and found two important factors. Speculators cause the bubbles and crashes, and ethanol causes the background rise.'"
    • "Among the possible causes put forward by economists are drought, meat-intensive dietary habits and market hypersensitivity to supply and demand. Another is corn-based biofuel: In less than a decade, some 15 percent of the world’s corn production has been converted from food to fuel. Perhaps most controversially, some economists have blamed a flood of speculators betting on the rise or fall of food prices."[2]
  • Land grab for renewable energy production could impact beef capacity, 26 September 2011 by Beef Central: "Rising demand for the dominant form of renewable energy worldwide – wood – could drive yet more foreign acquisitions of land, particularly in developing countries where food insecurity is rising and land rights are weak, researchers say."
    • "Wood accounts for 67 percent of global renewable energy supplies, and many northern hemisphere countries were increasing their use of it both to reduce their reliance on costly fossil fuels and to mitigate climate change."
    • "New tree plantations in developing countries designed to be harvested to export wood could spell good news in terms of jobs, investment, climate change and conversation — if they were well managed, the IIED report said. But there was also a risk that plantations would displace poor and marginalised communities from land they had tended to for generations."
    • "Biomass plantations may also compete for the best lands with food crops and livestock (and with biofuel feedstocks), adversely affecting local food security and further marginalising smallholder farming."[3]
  • Future of biofuels seen as hinging on long-term strategy, 16 September 2011 by BuffaloNews.com: "James D. Newman calls it the 'green-versus-green debate' in biofuels."
    • "People want to be environmentally conscious, but they hesitate to part with more green — as in money — to pay for alternative-fuel products, the president and CEO of Noco Energy Corp. says."
    • "The future of biofuels, including ethanol, is a hot topic nationally, with some arguing the need to bolster the industry, and others contending that the fuels need to prove themselves in the marketplace."
    • "The debate about biofuels also includes their operating performance and the impact on the cost of food used in their production."
    • "Beyond their 'green' appeal, Newman said, biofuels can also have an effect on U. S. energy security and fuel price volatility."
    • "While Newman doesn’t believe that volatility can be completely controlled, he thinks alternative fuels can help offset it 'because we won’t be relying on the traditional petroleum suppliers.'"
    • "'I think there’s more discussion now in this country going on about how to bring alternative fuels to the system,' he said, 'and I think there is great consumer awareness around the fact that we need to do something.'"[4]
  • Debate on ethanol role in livestock/poultry feed costs, 14 September 2011 by Delta Farm Press: "A Wednesday afternoon hearing of the House Subcommittee on Livestock, Dairy, and Poultry focused on the feed issues."
    • "The panel’s testimony uniformly painted ethanol -– with its government backing and production mandates -- as a key cause of livestock/poultry producers’ dipping profits and a coming rise in consumer prices."
    • "While livestock operations have become more efficient, 'lower feed availability will eventually mean still lower meat and poultry output and still higher meat and poultry prices.'"
    • "Rejecting such causality and claiming a deck stacked against it, the ethanol industry jumped into the fray early."
    • "'America’s ethanol producers are on pace to produce nearly 40 million metric tons of livestock feed in 2011 – a volume greater than all the corn used on cattle feedlots all across the country,' said a Renewable Fuels Association (RFA) release. 'Additionally, ethanol producers are poised to export nearly 25 percent of that volume to meet growing feed demands around the globe.'"
    • "The ethanol industry has been joined by the Obama administration in rejecting claims that the fuel is responsible for higher feed costs."[5]
  • Analysis: Ethanol industry to stay hungry for U.S. corn, 14 September 2011 by Reuters: "The U.S. ethanol industry is keeping its foot on the gas pedal at production plants, and if the trend continues it could defy a government forecast that the industry will have its first drop in corn use since the turn of the century."
    • "The government forecast, which was issued on Monday, was based on expected weaker gasoline use and higher corn prices."
    • "But for the near term, both domestic and export sales are strong, plus profit margins -- though volatile -- are largely healthy, factors that should feed continued strong demand for corn for ethanol."
    • "The U.S. mandate for conventional biofuel, which is mostly ethanol made from corn, will rise 600 million gallons next year to 13.2 billion gallons."
    • "The ethanol industry uses about 40 percent of the U.S. corn crop to make the alternative motor fuel, a factor which drives persistent criticism from food and livestock producers who say it drives up both corn prices and food prices."
    • "As harvest of the new U.S. corn crop gets under way, there simply may not be enough corn to go around, some ethanol experts said. That could drive corn prices even higher than the recent record levels."[6]
  • ILUC and the Food Versus Fuel Paradox, 11 August 2011 by Biomass Hub: "Indirect land use change (ILUC) is based on the premise that there may be unintended consequence associated with the expansion of croplands for ethanol or biodiesel production in response to increased global demand for biofuels, including the destruction of “virgin” lands and a corresponding release of carbon emissions."
    • "The ILUC backlash is inimical to the global expansion of biofuels as a traded commodity, as was seen in the EU’s most recent debate during a rework of its Renewable Energy Directive."
    • "Managing public perception, and more importantly, expectations, is key to expanding biofuels production worldwide to offset a much more worrisome public policy issue, petroleum dependence."
    • "Like ILUC, the food versus fuel debate exploded on the scene in 2008 as food prices around the world skyrocketed. In truth, the causes are complex and attributed to a web of factors. To attribute increases in food prices to the use of biofuels alone is both misleading and irresponsible."
    • "As we transition into the “Post Oil Age,” the ILUC and food versus fuel debates continue to constrain progress towards more sustainable fuels made from biomass. Although not necessarily a bad thing in all cases, the debate obscures the reality that all biofuels are not created equal."[7]
  • Report Links Biofuels With Food Prices, 4 August 2011 by The Wall Street Journal: "For years, commentators have blamed Asia’s rapidly-expanding middle class for pushing up the cost of food and creating markets so volatile prices have spiked to record levels two times in four years."
    • "But according to new research for the United Nations’ food body, the increasing diversion of grain and oilseeds to create fuel—particularly in the U.S. and Europe, which spend an estimates $8 billion a year supporting their biofuel industries—has had a far greater effect."
    • "In contrast to mainstream belief, it argues that without biofuels, the rate of feed consumption in everywhere but the Soviet Union (whose livestock industry is still recovering from a collapse under Communism) is actually slowing—despite the jump in demand for meat in Asia."
    • "Because of this, the report finds that 'limiting the use of food to produce biofuel is the first objective to be pursued to curb demand.' Those that are used should be produced 'where it is economically, environmentally and socially feasible to do so, and traded more freely,' it adds."[8]
  • Lufthansa to become first airline to run regular biofuel flights, 8 July 2011 by The Guardian: "Lufthansa will next Friday become the first airline to run regular commercial flights powered partially with biofuel."
    • "Airlines have flown many demonstration biofuel flights, but Lufthansa's LH013 11:15am Hamburg to Frankfurt flight will start the first passenger service to run on a blend of biofuel and conventional fuel."
    • "The company will use the novel fuel mix for six months on eight of its 28 daily 50-minute flights between the two German cities – a distance of 244 miles each way. The German airline says the 1,200 flights will save 1,500 tonnes of CO2."
    • "Biofuels could help airlines reduce carbon emissions. However critics say that biofuels take up land for growing food and raise prices. Worse, if they promote deforestation, they can actually raise emissions."
    • "One engine of the 200-seater Airbus A321 will be fed with a 50-50 mix of biofuel and conventional kerosene-based fuel, the other engine will run on kerosene alone. That will allow Lufthansa to compare the engines' performances under exactly the same conditions. It was not necessary to modify either engine."[9]
  • Battle Between Ethanol and Pork May Cause Corn Shortage, 8 June 2011 by CNBC.com: "A large international turnout is expected here this week at the World Pork Expo in Iowa. Hot topics include pushing for free trade with Panama, Colombia, and especially South Korea."
    • "The hottest topic, however, is the price of corn. Thursday, the USDA updates its outlook on this year's corn crop, the first update since flooding delayed planting."
    • "Which leads to the big beef between hogs and ethanol. Both are competing for corn, and after September, there may not be enough to go around."
    • "In its defense, the ethanol industry highlights the fact that after it extracts what it needs from corn, it sells the residual product back to the livestock industry as a nutritious, concentrated feed (though it contains less energy). This residual is called Dried Distillers Grains, or DDG."
    • "Hog farmers and meat packers are discovering that pigs don't process the DDGs the same way, and too much of the stuff in the diet affects the meat."
    • "So now hog farmers have one more reason to complain about ethanol."[11]
  • Biofuels boom in Africa as British firms lead rush on land for plantations, 31 May 2011 by The Guardian: "British firms have acquired more land in Africa for controversial biofuel plantations than companies from any other country, a Guardian investigation has revealed."
    • "Liquid fuels made from plants – such as bioethanol – are hailed by some as environmentally-friendly replacements for fossil fuels. Because they compete for land with crop plants, biofuels have also been linked to record food prices and rising hunger. There are also fears they can increase greenhouse gas emissions."
    • "A market has been created by British and EU laws requiring the blending of rising amounts of biofuels into petrol and diesel, but the rules were condemned as unethical and "backfiring badly" in April by a Nuffield Council on Bioethics commission."
    • "In the Guardian survey Italy is the next biggest player with seven companies, followed by Germany (six), France (six) and the US (four). Brazil and China have been acquiring land in Africa for biofuels and food but the investigation identified only a handful of established biofuels projects."[12]
  • Relax biofuel laws says World Bank as millions face food poverty, 20 April 2011 by TheGreenCarWebsite.co.uk: "The World Bank is calling on Governments around the world to relax laws requiring biofuels to be mixed with conventional fuels for road transport use as global food prices remain volatile."
    • "Driven in part by higher fuel costs connected to events in the Middle East and North Africa, global food prices are 36 per cent above their levels a year ago new World Bank Group numbers released this week reveal."
    • "The bank is calling on governments to divert more crop production away from biofuel use and ease export controls to prevent even more people falling below the extreme poverty line."
    • "While not suggesting that biofuel laws should be abolished altogether, the organisation is concerned that many of the greatest food price increases link to plants commonly used as biofuel sources. Crops such as maize show a 74 per cent increase in price, while other biofuel crops such as wheat show a 69 per cent increase and soybeans show a 36 per cent increase, although rice prices have been stable."[13]
  • Sen. Harkin: Biofuels Don’t Contribute to World Hunger, 18 April 2011 by Earth911.com: "Sen. Tom Harkin (D-IA) dismissed concerns Thursday that ethanol and other biofuels are contributing to rising food prices and world hunger."
    • "The five-term Senator said the U.S. has not reduced the amount of corn it exports, and increased ethanol production in recent years has been matched by increased corn production."
    • "Biofuels currently account for nearly 10 percent of U.S. gasoline supplies. The 13 billion gallons America produces each year fall well short of the 36 billion gallons 2007’s Renewable Fuel Standard requires the country to produce by 2022."
    • "Harkin said that number is still attainable, but several of the committee’s members cited concerns that the U.S. has maxed out how much ethanol it can produce. This fear stems from the fact most fuel in America is 90 percent gasoline and 10 percent ethanol, creating a 'blend wall' that prevents ethanol from accounting for more than 10 percent of the nation’s fuel."
    • "Harkin said the Biofuels Market Expansion Act, which he introduced in January, would help the country push past the blend wall. The bill would require car companies to make more flex-fuel vehicles – which can operate on more than one fuel at a time – and gas companies to equip more of their filling stations with blender pumps that provide fuel with higher concentrations of ethanol."[14]
  • Small-scale farmers increasingly at risk from 'global land grabbing', 15 April 2011 by The Guardian: "Fresh evidence from Africa, Asia, Latin America and the former Soviet Union was presented last week at an international conference on 'global land grabbing' convened by the Land Deal Politics Initiative and hosted by the Future Agricultures Consortium at the Institute of Development Studies, where researchers revealed documentation of land deals amounting to over 80m hectares – almost twice what was previously estimated."
    • "With land deals accelerating, particularly in Africa, it is essential that the fine print of such deals is subject to careful scrutiny, and that transparent and accountable governance mechanisms are put in place."
    • "The rush to acquire land is driven by four factors: food price volatility and unreliable markets; the energy crisis and interest in agro-energy/biofuels; the global financial crisis; and a new market for carbon trading."
    • "The commodification and privatisation of land and the dispossession of farmers and herders is seldom taken into account in the boardrooms of corporations or in high-level meetings with governments."[15]
  • Biofuel policy is causing starvation, says Nestlé boss, 23 March 2011 by The Independent: "Peter Brabeck-Letmathe, the chairman of Nestlé, lashed out at the Obama administration for promoting the use of ethanol made from corn, at the expense of hundreds of millions of people struggling to afford everyday basics made from the crop."
    • "'Today, 35 per cent of US corn goes into biofuel,' the Nestlé chairman told an audience at the Council on Foreign Relations (CFR) in New York yesterday. 'From an environmental point of view this is a nonsense, but more so when we are running out of food in the rest of the world.'"
    • Corn prices almost doubled in the year to February, though they have fallen from their peak in the pastfew weeks."
    • "US exports account for about 60 per cent of the world's corn supply. Demand has surged as more people join the middle classes in emerging economies such as China and India, not just because these new consumers demand more food made from corn, but also because demand for meat has increased and livestock farmers need to buy more feed."
    • "The lobbying has fallen on deaf ears in the US, however. Ethanol production from corn is heavily subsidised, with output running at more than 13.5 billion gallons annually."[16]
  • World at risk of another food crisis: FAO, 14 March 2011 by Reuters: "A jump in oil prices and the fast recent drawdown in global stocks of cereals could herald a supply crisis, FAO Director General Jacques Diouf told Reuters in an interview during a visit to the United Arab Emirates."
    • "'The high prices raise concern and we've been quickly drawing down stocks,' he said. 'For years we have warned that what is needed is more productivity and investment in agriculture.'"
    • "February's UN Food Price Index rose for the eighth consecutive month, to the highest levels since at least 1990. Every commodity group except sugar rose last month."
    • "The FAO has asked developed countries to re-examine their biofuels strategies -- which include large subsidies -- since these have diverted 120 million tonnes of cereals away from human consumption to convert them to fuels."
    • "Avoiding another food crisis hinges on crop yields in the next harvest season, as well as how economic growth impacts demand, Diouf said. But he also said rising food prices and oil prices could have a detrimental effect on growth."[17]
  • Summit to tackle E10 biofuel debacle held, 8 March 2011 by The Local: "Berlin is working to implement a European Union directive that says biofuels should make up 10 percent of EU vehicle fuel consumption by 2020 to make the continent less dependent on foreign supplies."
    • "The new E10 petrol contains 10 percent biofuel made from crops and has been sold at German filling stations since last month."
    • "But many drivers have spurned E10 because they fear damage to their motors even though the VDA auto federation says it is suitable for 93 percent of petrol-driven vehicles."
    • "'Some drivers buy E10, but 'no more than 10 percent,' Tomas Gloos,a petrol-station manager, told AFP, and 'most of them do so without knowing it.'"
    • "While the oil industry has been accused of providing little information on the new fuel, environmental associations have slammed it for poor results in carbon dioxide emission tests."
    • "They note also that biofuels require farmland that could be used to raise crops for food, putting pressure on prices that are now attracting consumers' attention."[18]
  • Climate change, biofuels threaten food security-FAO, 7 March 2011 by Scientific American: "Climate change bringing floods and drought, growing biofuel demand and national policies to protect domestic markets could drive up global food prices and threaten long-term food security, the United Nations' Food and Agriculture Organization said."
    • "The Rome-based FAO has already warned food-producing countries against introducing export curbs to protect local markets as world food prices push further above the levels that triggered deadly riots in 2007/2008."
    • "The number of hungry people could fall by 100-150 million people if women farmers were given the same access to production and financial resources as men, the agency said."
    • "Farm output in developing countries could rise by 2.5-4.0 percent if yields on the land farmed by women increased to the levels achieved by men. That in turn would reduce the global number of undernourished people by 12-17 percent."[19]
  • Vilsack: US Farms Producing Enough for Food & Biofuels, 6 March 2011 by DomesticFuel.com: "Secretary of Agriculture Tom Vilsack says American farmers are producing enough to provide the food AND fuel, in particular ethanol and biodiesel, this country needs."
    • "Vilsack took the blame for food price increases off the American farmers and biofuels industry and put it on a more likely culprit."
    • "'I think OPEC has more to do with food price increases than farmers,' pointing out that even if you doubled the price of commodities, farmers, with their paltry 20 cents of every food dollar share, wouldn’t see much of an increase in their pocketbooks."[20]
  • NASCAR goes 'green,' enters biofuel debate, 20 February 2011 by Daytona Beach News Journal: "Every car and truck in NASCAR's top three series in 2011 will use Sunoco Green E15 -- a blend of gasoline with 15 percent corn ethanol. NASCAR, the federal government and corn ethanol producers say the biofuel reduces emissions and decreases American reliance on foreign oil."
    • "Many environmental advocates are dubious about corn ethanol's benefits, and some people think governmental support for ethanol is largely to blame for soaring food prices."
    • "Mike Lynch, NASCAR's managing director of green innovation, and ethanol advocates question the impact of expanded ethanol use on corn prices, though, and point out the federal government is solidly behind ethanol, dating back to the 1970s."
    • "The U.S. churned out more than 13 billion gallons of ethanol in 2010, more than four times the amount produced in 2000. The percentage of U.S. corn crops used for ethanol has grown from about 5 percent in 2000 to 39 percent in 2010, and recent reports that America's corn reserves are at an all-time low has food industry leaders concerned."
    • "Nikoleta Panteva, an analyst who studies agricultural markets for IBISWorld, an industry research firm, called the impact of corn ethanol use on food prices 'not significant' when compared to factors like weather."[21]
  • U.S. Corn Reserves at Lowest Level in More Than 15 Years, 9 February 2011 by The New York Times: "Reserves of corn in the United States have hit their lowest level in more than 15 years, reflecting tighter supplies that will lead to higher food prices in 2011."
    • "The Department of Agriculture reported Wednesday that the ethanol industry’s projected orders this year rose 8.4 percent, to 13.01 billion bushels, after record-high production in December and January."
    • "That means the United States will have about 675 million bushels of corn left at the end of the year. That is about 5 percent of all corn that will be consumed, the lowest surplus level since 1996."[22]
  • New paper by Tim Searchinger: Evaluating Biofuels: The Consequences of Using Land to Make Fuel (PDF file), published by the German Marshall Fund of the United States - 2009.
    • "If not used for biofuels, land would typically already be growing plants that are removing carbon from the atmosphere."
    • "Many controllable factors could in theory change the world land use situation for good or bad, but if those factors are independent of biofuels, they neither make biofuels a better strategy nor a worse one."
    • "To the extent biofuel critics have blamed these rises in crop price for increased retail food prices in the United States and Europe, they have probably exaggerated. Crop prices are a small fraction of the retail food prices paid in grocery stores, and an even smaller fraction in restaurants. But the impact on the poor in developing countries is large, particularly on the roughly one billion people who live on $1 per day or less and who are likely already chronically malnourished, and the three billion who live on less than $2 per day."
  • UN debates global food cost rise, 26 January 2009 by BBC News: "Although [food] prices have fallen from the highs recorded during the unprecedented spike at the beginning of 2008, they have not fallen back to where they had been before the crisis began."
    • "And many of the factors that contributed to the rise then are still driving prices up....These include competition with biofuels for scarce land, worsening agricultural productivity, the increasing proportion of people living in cities, and the effects of climate change threatening harvests."[23]
  • Secret report: biofuel caused food crisis, 4 July 2008 in The Guardian: "Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian."
    • "The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises."
    • "Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt."
    • The report "argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher."[25]


Controversies concerning bioenergy edit
Food security | Food-versus-fuel debate (Biofuel impacts on food prices)

Food crops used for biofuels: corn

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