Food price increases: is it fair to blame biofuels?

Executive Summary

The price of food staples has risen by up to 244% since 2004. The media has been quick to blame the biofuels industry. In October 2007 Jean Ziegler, the United Nations Special Rapporteur on the Right to Food1*, kicked things off by describing it as “a crime against humanity to divert arable land to the production of crops which are then burned for fuel”. Since then no article on food price increases has failed to mention biofuels as a main driver of increases in the price of food staples around the world.

The Food and Agriculture Organisation of the UN has said that biofuels have contributed 10% to food price rises. Washington’s International Food Policy Research Institute has claimed that increased biofuel demand accounted for 30% of the increase in weighted average grain prices in 2007 and early 2008, ranging from 21% to 22% on rice and wheat, to 39% for maize. Other bodies, including the IMF, have estimated biofuels’ contribution to recent food price rises at between 20% and 30%. What is the true picture?

New Energy Finance has analysed food price increases between January 2004 and April 2008, breaking them down into their constituent drivers: input costs, dollar depreciation, supply-demand factors and speculative activity. We conclude that increased biofuels production has been a meaningful driver of food price inflation, particularly in certain crops and geographies, but it is far from the dominant factor. Increases in input costs have played a much larger role, as have changes in consumption habits and increases in global population which, for the first time in decades, have not been offset by increases in agricultural yields, particularly in grains. Furthermore, where biofuels have had significant impacts, this has been due to overly-rapid application of support schemes and protectionism, rather than to the impact of production on land use itself.

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