Biofuel impact on food prices should be put into perspective
Since the 2008 food crisis, there have been intense discussions concerning the potential negative consequences of high and volatile prices for world nutrition, and in particular the role of biofuel production in driving high food prices.
That includes many contributions in European Voice and on its website, including recently a letter from Oxfam and ActionAid (“Fuel or food?”, EuropeanVoice.com, 18 June). But a more subtle analysis tells us a different story.
For decades, international organisations and agricultural economists argued that low prices aggravated the hunger problem. (In 2005, for example, the Food and Agriculture Organization of the United Nations wrote: “The long-term downward trend in agricultural commodity prices threatens the food security of hundreds of millions of people in some of the world’s poorest developing countries.”)
Since 2008, they have generally argued the opposite – that rapidly rising food prices threaten food security. In both cases, either the consumers or the producers have been neglected, and only half of the story has been told.
To be clear, there is no doubt that an additional demand for biofuel feedstocks has an effect on prices on international agricultural commodity markets. However, the extent to which biofuel contributes to price rises is overestimated. In fact, the volatility of international commodity prices has not changed much since 2006. In the early 1970s, volatility was even higher than today. There is no significant trend in terms of volatility since the growth in biofuel production. This also holds true for most domestic markets in developing countries, where the degree of volatility has in some cases even decreased.
Furthermore, only a few words are said about the main drivers of poverty and food security in the developing world. More than 90% of poverty and hunger is caused by bad governance, poor administration, corruption, missing infrastructure and education, absence of property rights and discrimination against agriculture and rural areas (urban bias) by export and production taxes, import subsidies, and overvalued currencies. These – domestic – factors are even more relevant for local food prices, because more than 80% of the markets in the developing world are not integrated into the global economy and therefore follow their own rules. As long as these deficits are not removed, the potential benefits of investment in land cannot be realised.
European Union leaders are right to call for a science-based approach to biofuel and indirect land-use change (ILUC). But the quantity of European crops that would be used for biofuel represents less than 2% of the world’s arable land. Current moves serve only to taint commendable objectives such as combating global hunger and climate change.
Even if no biofuel were to be produced from this day on, agricultural land would still continue to expand.