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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.

4th July - Aditya Chakrabortty, The Guardian (UK) 

The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.

Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush.

"It would put the World Bank in a political hot-spot with the White House," said one yesterday.

The news comes at a critical point in the world's negotiations on biofuels policy. Leaders of the G8 industrialised countries meet next week in Hokkaido, Japan, where they will discuss the food crisis and come under intense lobbying from campaigners calling for a moratorium on the use of plant-derived fuels.

It will also put pressure on the British government, which is due to release its own report on the impact of biofuels, the Gallagher Report. The Guardian has previously reported that the British study will state that plant fuels have played a "significant" part in pushing up food prices to record levels. Although it was expected last week, the report has still not been released.

"Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises," said Robert Bailey, policy adviser at Oxfam. "It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat."

Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt. Government ministers here have described higher food and fuel prices as "the first real economic crisis of globalisation".

President Bush has linked higher food prices to higher demand from India and China, but the leaked World Bank study disputes that: "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases."

Even successive droughts in Australia, calculates the report, have had a marginal impact. Instead, it argues that the EU and US drive for biofuels has had by far the biggest impact on food supply and prices.

Since April, all petrol and diesel in Britain has had to include 2.5% from biofuels. The EU has been considering raising that target to 10% by 2020, but is faced with mounting evidence that that will only push food prices higher.

"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," says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

It 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.

Other reviews of the food crisis looked at it over a much longer period, or have not linked these three factors, and so arrived at smaller estimates of the impact from biofuels. But the report author, Don Mitchell, is a senior economist at the Bank and has done a detailed, month-by-month analysis of the surge in food prices, which allows much closer examination of the link between biofuels and food supply.

The report points out biofuels derived from sugarcane, which Brazil specializes in, have not had such a dramatic impact.

Supporters of biofuels argue that they are a greener alternative to relying on oil and other fossil fuels, but even that claim has been disputed by some experts, who argue that it does not apply to US production of ethanol from plants.

"It is clear that some biofuels have huge impacts on food prices," said Dr David King, the government's former chief scientific adviser, last night. "All we are doing by supporting these is subsidising higher food prices, while doing nothing to tackle climate change."

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The appetite for biofuel starves the poor

4th July 08 - Benjamin Senauer, The Guardian

The evidence linking biofuel production to rising food prices can't be ignored. Between the start of 2002 and early 2008, basic global food commodity prices rose by 220%. The global production of biofuels - ethanol and bodiesel - rose from less than 8m gallons in 2004 to an estimated 18m gallons in 2008. The most rapid increase has been in the production of ethanol derived from corn in the US: rising from about 3.5m gallons in 2004 to an estimated 9m in 2008. This year ethanol production is forecast to consume 30% or more of 2008's entire US corn crop.

Because of the surging price of agricultural commodities, Josette Sheeran, the executive director of the World Food Program, has warned that a "tsunami of hunger" is sweeping through the poorer countries of the world. Robert Zoellick, the president of the World Bank, has said that as many as 100 million people in the world have been forced into poverty and hunger because of the dramatic increase in food prices. These are people who live on the equivalent of less than $1 a day and whose households spend 70% or more of their meagre budgets on basic food staples. A debate is raging over the role biofuels, especially corn-based ethanol, have played in increasing food prices, and hence in the rising number of people going hungry.

Ed Schafer, the US Secretary of Agriculture, has said that biofuels account for only a few percent of the rise in the price of food, an estimate that would seem unbelievably low. One of the most reliable independent estimates comes from the International Food Policy Research Institute (IFPRI). IFPRI maintains the most sophisticated model of global agricultural commodity supply and utilization, referred to by the acronym Impact. Based on that model, IFPRI estimates that 30% of the increase in the prices of the major grains is due to biofuels. And now we learn that the World Bank's own unpublished forecasts suggest that biofuels have forced global food prices up by 75%.

The increasing US output of ethanol, by raising the price of corn, pulls land from the production of other crops and leads to substitutions elsewhere, so more wheat and other grains may be used to feed livestock. Moreover, for many countries food price inflation is so high that it has become a serious political problem. There have been food riots and protests in over 15 developing countries. A number of major food-producing countries have restricted their agricultural exports in an attempt to hold down the increase in domestic prices. India and Vietnam, usually major rice exporters, have cut off exports, thus reducing the global supply and pushing rice prices through the roof on world markets.

Grains are the staple food of most people in the developing world, although which particular cereal depends on the region. We can combine IFPRI's estimate that biofuels account for 30% of the rise in grain prices and the World Bank president's figure of 100 million more hungry people due to higher food prices. This combination suggests that biofuels are responsible for 30 million more people going hungry in the world. The IFPRI model also allows us to estimate the number of malnourished children less than age five under various conditions. Based on the model there are some 2.4 million more malnourished pre-schoolers in the developing countries in 2008 due to the impact of biofuels. Current research, that I and colleagues are working on, suggests that 390,000 additional children under the age of five will die because of this increase in malnutrition due to biofuels. If current biofuel development trends continue, child deaths will rise to 475,000, almost one-half million by 2010. If the leaked World Bank figures are more accurate, then that figure could be even higher.

Oxfam has called for a moratorium on biofuel mandates, and an end to subsidies - under the latest US farm bill the ethanol subsidy is 45 cents per gallon. Even the International Monetary Fund calls for a re-examination of these subsidies. The biofuel policies of the presumptive candidates for the US presidency have received little attention so far. However, both Barack Obama and John McCain need to re-examine their positions in light of the devastating impact biofuels are having on global hunger.

Benjamin Senauer is a professor of applied economics at the University of Minnesota. These are the personal views of the author and do not necessarily reflect the position of the University of Minnesota.

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