March 8, 2010
The impact of biofuels on food supplies present and future is one of the latest worries of the environmental lobby. Once favoured a s a means of reducing finite fossil fuel dependency, it is now seen as snatching basic foods from the mouths of the poor to feed the fuel tanks of the affluent. The latest jeremiad on this theme comes from the charity Action Aid. It argues that biofuels expansion means that wheat and maize badly needed for food is being diverted into bioethanol production and that land in developing countries is being diverted from food production to produce biofuel feedstock.
While there could be some justification for the second of these claims, the first does not stand up to critical examination. On the basis of not very well sourced or argued reports from the World Bank and the IMF its is claimed that grain use in biofuel production could have been responsible for raising food prices by as much as 70 per cent during the 2007/08 food price ‘crisis’. Leaving aside the land grab issue, Action Aid is also concerned about future strains on the food supply system.
Closer analysis would suggest that biofuel demand for grains played a relatively minor role in the recent food price inflation. Most recently available data would suggest that it was other factors rather than any ’diversion’ of grain into biofuels which caused food prices to more than double on international markets between the autumn of 2007 and midsummer 2008.
Most importantly, reports of a reduced world wheat harvest (note that the bulk of the grains used for biofuels is maize not wheat) allied to international stock rundown set off the speculative escalation of grain prices in 2007/08. Most market analysts agree that the trade had already taken into account the likely level of maize and wheat use for biofuel feedstock. There was certainly no sudden ‘diversion’ of grain to fuel.
While the use of principally maize, but also wheat for fuel has increased steadily since 2000, the consumption for this purpose in 2007/08 was less than 4.5 per cent of total world grain production. It should also be noted that the bulk of biofuel feedstock for ethanol production comes from sugar – three times the amount of grain used. There is a massive world surplus of sugar production capacity, mainly in developing countries needy for the cash which this industry brings.
What should also not be forgotten is that agricultural supply shortages are nearly always short term. Partly due to weather, but also because of the stimulation of high prices, the 2008 harvest reached record levels. For the future, there are still vast reserves under-utilised land in Europe and elsewhere. Idle hectares and underfarmed land will be brought into production under the stimulus of increased demand. To give just one concrete example: It is estimated by Russian researchers that there are currently 10 million hectares of land idle in Russia, Ukraine and Kazakhstan.