Biofuels push up food prices, says report

ActionAid accuses G8 of driving more people into poverty by pursing biofuels and cutting agri-aid

Andrew Charlesworth, BusinessGreen 04 Jul 2008

A recent report from the charity ActionAid points to biofuels as one of the three main contributors to rising global food prices.

The report, Cereal Offenders, is seen as a further blow to investor confidence in fossil fuel additives produced from grain. It accuses the leaders of the G8 countries of pursuing biofuel production, slashing agricultural aid and neglecting to act on climate change to the detriment of the world’s poor.

ActionAid estimates that the 82 per cent rise in food prices since 2006 has put 760 million people at risk of hunger in addition to the 100 million who have been pushed below the dollar-a-day poverty level.

“The rise of biofuel production and the increasing impact of climate change coupled with an unparalleled decrease in agricultural aid are creating a triple whammy for poor countries,” said Tom Sharman, Action Aid policy officer.

Biofuel subsidies to US and EU farmers are worth between $16bn (£8bn) and $18bn (£9bn) a year, says the report. Consequently, grain and vegetable oil are being diverted to biofuels, leading to scarcity and rocketing prices. In the developing world, land on which farmers and pastoralists produce food is being converted to biofuel monocultures.

The result, according to ActionAid, is that about 260 million people are either hungry or at risk of hunger because of biofuels.

The charity is calling for all biofuels subsidies and targets to be removed and a five-year moratorium imposed on the diversion of arable land into biofuel mono-cropping.

The report also points to decreasing agricultural aid to developing nations’ farmers from the G8 and increasing pressure on agricultural land in low latitudes because of climate change.

In Africa, yields from rain-fed agriculture could drop by 50 per cent by 2020 because of rising temperatures, floods and droughts, says the charity.

ActionAid’s figures are disputed by US agriculture secretary Ed Schafer, who estimates biofuels are responsible for only two to three per cent of the rise in food prices.

However, that global food prices are distorted by subsidies is not disputed. A study by the International Food Policy Research Institute (IFPRI) calculates that dismantling food subsidies would reduce global cereals prices by an average of 30 per cent.

Rising oil prices also push up the price of food because they increase the cost of fertilisers and distribution.

Furthermore, large wheat-producing areas such as Australia have been hit by drought this year, which has diminished their harvest. A bumper crop is predicted for 2009 from Canada, China and the EU, where the wheat harvest is expected to rise from 120 million to 137.5 milliion.

However, the IFPRI has warned that grain prices will remain high into 2010 and UN general secretary Ban Ki-Moon told the Rome food summit on 3 June that food output needs to rise by 50 per cent by 2030.

See also:

Is this the end of the road for first gen biofuels?

Government review expected to call for rethink over biofuel targets, as producers argue lack of certainty over government policy is impacting investor confidence 19 Jun 2008