Bio-fuels

The diversion of food commodities towards biofuel production is having a significant impact on the price and availability of food.

In the US, over 20% of corn production now goes into bio-fuel production. It is now embedded in US and EU law that a percentage of petrol should be derived from ethanol so this is not a temporary fad.

To meet this demand, land intended for food crops has been diverted to bio-fuels, resulting in a depletion of existing grain stocks and increasing food prices.

Bio-fuels, it is argued on the one hand, bolster energy security, reducing dependence on fossil fuels. Bio-fuels are claimed to be cheaper, produce less greenhouse emissions, create animal feed by-products and provide higher incomes for farmers.

On the other hand, biofuels can create distortions in the food supply mechanism. Crops previously intended for human consumption might be diverted towards fuel production, supported by state subsidies.

"Almost all the increase in global maize production from 2004 – 2007 went towards bio-fuels production" World Bank

There can be no doubt that the expansion of bio-fuel production has altered the way land has been used recently. A study conducted by the World Bank estimates that land allocation to maize production increased by 23% in 2007, resulting in a 16% decline in the planting of soya beans, which in turn contributed towards a 75% rise in soybean prices between April 2007 and April 2008. A number of wheat producing countries diverted land resources to oilseeds instead of planting wheat, resulting in a 50% depletion of wheat stocks.

Increased demand from bio-fuel production has removed surplus production and
inventories of grain and will be one of the drivers underpinning longer term rises
in food commodity prices. 
 
 

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