World Bank Says Biofuels Starving World's Poor

The following report, based on the World Bank report below, is from outsidethebeltway.com yesterday at http://www.outsidethebeltway.com/archives/2008/04/biofuels_starving_worlds_poor/

The drastic rise in prices for corn, rice, and other staples that is wreaking havoc in parts of the developing world is due in large part to Western investment in biofuels, according to a recent report of the World Bank.

The rising trend in international food prices continued, and even accelerated, in 2008.

U.S. wheat export prices rose from $375/ton in January to $440/ton in March, and Thai rice export prices increased from $365/ton to $562/ton. This came on top of a 181 percent increase in global wheat prices over the 36 months leading up to February 2008, and a 83 percent increase in overall global food prices over the same period.

Increased bio-fuel production has contributed to the rise in food prices.

Concerns over oil prices, energy security and climate change have prompted governments to take a more
proactive stance towards encouraging production and use of bio-fuels. This has led to increased demand for bio-fuel raw materials, such as wheat, soy, maize (corn) and palm oil, and increased competition for cropland.

Almost all of the increase in global maize (corn) production from 2004 to 2007 (the period
when grain prices rose sharply) went for bio-fuels production in the U.S..

The observed increase in food prices is not a temporary phenomenon, but likely to persist in the medium term. .., they are likely to remain well above the 2004 levels through 2015 for most food crops.

Forecasts of other major organizations (FAO, OECD, and USDA) that regularly monitor and project commodity prices are broadly consistent with these projections. Predictions of high food price...are further strengthened when we factor in the impact of policies aimed at achieving energy security and reduced carbon dioxide emissions, which may present strong trade-offs with food security objectives.

More details are available in the backgrounder, “Rising food prices: policy options and World Bank response” [PDF].

World Bank President Bob Zoellick was on NPR this morning talking about this.

Demand for ethanol and other biofuels is a “significant contributor” to soaring food prices around the world.. helped create “a perfect storm” that has boosted those prices, he says.

The soaring costs of food and fuel led to riots in Haiti and Egypt and a general strike in Burkina Faso this week. Skyrocketing food prices are topping the agenda this weekend of the World Bank and International Monetary Fund annual spring meetings in Washington.

Zoellick held up a bag of rice during a news conference Thursday to illustrate the severity of the food crisis. “In Bangladesh a two-kilogram bag of rice … now consumes about half of the daily income of a poor family,” he said. “The price of a loaf of bread … has more than doubled. Poor people in Yemen are now spending more than a quarter of their incomes just on bread.”

And Zoellick says prices for basic staples will remain high for an extended period of time...As the Indian commerce minister said to me, going from one meal a day to two meals a day for 300 million people increases demand a lot.

"It has long struck me as wrongheaded, if not immoral, to take cheap, efficient sources of nutrition to turn them into expensive, inefficient fuels. "

A gallon of ethanol produces roughly two-thirds the energy of a gallon of gasoline and is far more expensive. And, while farmers and, especially, processors make more money by the increased demand for biofuels, it means that food is now out of reach for millions.

Where to draw the line on these things is unclear. It’s inefficient to feed grain to livestock in order to produce meat — another trend highlighted by Zoellick and the report. But at least that’s turning food into a more desirable (if not necessarily more healthy) food.