News and Analysis • Volume 8 • Number 5 • 20th March 2008
World Food Prices Soar - Are Biofuels To Blame?
The rapid rise in basic food prices is being linked to biofuels production, among other drivers.
Food prices rose by more than 40 percent in 2007. The main reasons include high energy prices, climate change, higher food demand and the increasing use of biofuels. According to Josette Sheeran, Executive Director of the UN World Food Programme, the problem is here to stay, and will have an impact on international trade in agricultural products.
In addition to calling for increased funding for the World Food Programme, Sheeran said more land should be used to grow food rather than biofuels. According to Sheeran, “governments need to look more carefully at the link between the acceleration in biofuels and food supply and give more thought to [biofuels policy].” Her comment came at the heels of discussions of an EU-wide target to increase the amount of biofuels used in vehicle fuel in order to combat climate change (see Bridges Trade BioRes, 25 January 2008, http://www.ictsd.org/biores/08-01-25/story1.htm). There is a similar new US law that calls for an increase in the amount of biofuels used in vehicle fuel.
The UN Food and Agriculture Organisation (FAO) and the European Bank for Reconstruction and Development (EBRD), for their part, recently made a proposition for how to deal with the problem of rising food prices. According to these institutions, the “significant untapped agricultural production potential” in Eastern Europe, Kazakhstan, Russia and Ukraine should be unlocked through increased public-private partnerships to facilitate agricultural investment. According to the FAO and EBRD, 23 million hectares of suitable agricultural land has been withdrawn from production in this area of the world. At least 13 million hectares could be returned to production without significant environmental cost. Jacques Diouf, Director-General of the FAO, said that if institutional and financial constraints currently limiting production in the region were to be removed, its cereal output and contribution to world exports would grow to above the seven percent increase in grain production needed between 2007 and 2016.
ICTSD Reporting; “UN Sees More Hunger, Unrest Over Food Inflation,” Reuters, 10 March 2008; “EBRD and FAO Call For Bold Steps to Contain Soaring Food Prices: Moves Needed Now to Unlock Unused Agricultural Potential in Eastern Europe,” FAO Newsroom, 10 March 2008; “Investment Could Moderate Skyrocketing World Food Prices,” Environment News Service, 12 March 2008.