Food vs. fuel is the dilemma regarding the risk of diverting farmland or crops for biofuels production in detriment of the food supply on a global scale. The "food vs. fuel" or "food or fuel" debate is international in scope, with good and valid arguments on all sides of this issue. The discussion on this page is only about using food crops for fuel and ignores methanol bio fuels and the methanol economy. There is disagreement about how significant this is, what is causing it, what the impact is, and what can or should be done about it.
Biofuel production has increased in recent years. Some commodities like maize, sugar cane or vegetable oil can be used either as food, feed or to make biofuels. For example, since 2006, land that was also formerly used to grow other crops in the United States is now used to grow maize for biofuels, and a larger share of maize is destined to ethanol production, reaching 25% in 2007. Since converting the entire grain harvest of the US would only produce 16% of its auto fuel needs, some experts believe that placing energy markets in competition with food markets for scarce arable land will inevitably result in higher food prices. A lot of R&D efforts are currently being put into the production of second generation biofuels from non-food crops, crop residues and waste. Second generation biofuels could hence potentially combine farming for food and fuel and moreover, electricity could be generated simultaneously, which could be beneficial for developing countries and rural areas in developed countries. With global demand for biofuels on the increase due to the oil price increases taking place since 2003 and the desire to reduce oil dependency as well as reduce GHG emissions from transportation, there is also fear of the potential destruction of natural habitats by being converted into farmland. Environmental groups have raised concerns about this trade-off for several years, but now the debate reached a global scale due to the 2007–2008 world food price crisis. On the other hand, several studies do show that biofuel production can be significantly increased without increased acreage. Therefore stating that the crisis in hand relies on the food scarcity.
Brazil has been considered to have the world's first sustainable biofuels economy and its government claims Brazil's sugar cane based ethanol industry has not contributed to the 2008 food crisis. A World Bank policy research working paper released in July 2008 concluded that "...large increases in biofuels production in the United States and Europe are the main reason behind the steep rise in global food prices", and also stated that "Brazil's sugar-based ethanol did not push food prices appreciably higher".
Food price inflation
From 1974 to 2005 real food prices (adjusted for inflation) dropped by 75%. Food commodity prices were relatively stable after reaching lows in 2000 and 2001. Therefore, recent rapid food price increases are considered extraordinary. A World Bank policy research working paper published on July 2008 found that the increase in food commodities prices was led by grains, with sharp price increases in 2005 despite record crops worldwide. From January 2005 until June 2008, maize prices almost tripled, wheat increased 127 percent, and rice rose 170 percent. The increase in grain prices was followed by increases in fats and oil prices in mid-2006. On the other hand, the study found that sugar cane production has increased rapidly, and it was large enough to keep sugar price increases small except for 2005 and early 2006. The paper concluded that biofuels produced from grains have raised food prices in combination with other related factors between 70 to 75 percent, but ethanol produced from sugar cane has not contributed significantly to the recent increase in food commodities prices.
An economic assessment report published by the OECD in July 2008 found that " ...the impact of current biofuel policies on world crop prices, largely through increased demand for cereals and vegetable oils, is significant but should not be overestimated. Current biofuel support measures alone are estimated to increase average wheat prices by about 5 percent, maize by around 7 percent and vegetable oil by about 19 percent over the next 10 years. "
Corn is used to make ethanol and prices went up by a factor of three in less than 3 years (measured in US dollars). Reports in 2007 linked stories as diverse as food riots in Mexico due to rising prices of corn for tortillas, and reduced profits at Heineken the large international brewer, to the increasing use of corn (maize) grown in the US Midwest for ethanol production. (In the case of beer, the barley area was cut in order to increase corn production. Barley is not currently used to produce ethanol.) Wheat is up by almost a factor of 3 in 3 years, while soybeans are up by a factor of 2 in 2 years (both measured in US dollars).
As corn is commonly used as feed for livestock, higher corn prices lead to higher prices in Animal source foods. Vegetable oil is used to make biodiesel and has about doubled in price in the last couple years. The price is roughly tracking crude oil prices. The 2007–2008 world food price crisis is blamed partly on the increased demand for biofuels.
Rice prices have gone up by a factor of 3 even though rice is not directly used in biofuels.
The USDA expects the 2008/2009 wheat season to be a record crop and 8% higher than the previous year. They also expect rice to have a record crop. Wheat prices have dropped from a high over $12/bushel in May 2008 to under $8/bushel in May. Rice has also dropped from its highs.
According to a new report from the World Bank , the production of biofuel is pushing up food prices. These conclusions were confirmed by the Union of Concerned Scientists in their September 2008 newsletter in which they remarked that the World Bank analysis "contradicts U.S. Secretary of Agriculture Ed Schaffer's assertion that biofuels account for only a small percentage of rising food prices."
According to the October Consumer Price Index released Nov. 19, 2008, food prices continued to rise in October 2008 and were 6.3 percent higher than October 2007. Since July 2008 fuel costs dropped by nearly 60 percent.
Proposed causes
Ethanol fuel as an oxygenate additive
The demand for ethanol fuel produced from field corn was spurred in the U.S. by the discovery that methyl tertiary butyl ether (MTBE) was contaminating groundwater. MTBE use as a oxygenate additive was widespread due to mandates of the Clean Air Act amendments of 1992 to reduce carbon monoxide emissions. As a result, by 2006 MTBE use in gasoline was banned in almost 20 states. There was also concern that widespread and costly litigation might be taken against the U.S. gasoline suppliers, and a 2005 decision refusing legal protection for MTBE, opened a new market for ethanol fuel, the primary substitute for MTBE. At a time when corn prices were around US$ 2 a bushel, corn growers recognized the potential of this new market and delivered accordingly. This demand shift took place at a time when oil prices were already significantly rising.
Other factors
That food prices went up at the same time fuel prices went up is not surprising and should not be entirely blamed on biofuels. Energy costs are a significant cost for fertilizer, farming, and food distribution. Also, China and other countries have had significant increases in their imports as their economies have grown. Sugar is one of the main feedstocks for ethanol and prices are down from 2 years ago. Part of the food price increase for international food commodities measured in US dollars is due to the dollar being devalued. Protectionism is also an important contributor to price increases. 36% of world grain goes as fodder to feed animals, rather than people.
Over long time periods population growth and climate change could cause food prices to go up. However, these factors have been around for many years and food prices have jumped up in the last 3 years, so their contribution to the current problem is minimal.
Governments distorting food and fuel markets
France, Germany, The United Kingdom and The United States governments have supported biofuels with tax breaks, mandated use, and subsidies. These policies have the unintended consequence of diverting resources from food production and leading to surging food prices and the potential destruction of natural habitats. Current government policies cause distortions of supply and demand.
Fuel for agricultural use often does not have fuel taxes (farmers get duty-free petrol or diesel fuel). Biofuels may have subsidies and low/no retail fuel taxes. Biofuels compete with retail gasoline and diesel prices which have substantial taxes included. The net result is that it is possible for a farmer to use more than a gallon of fuel to make a gallon of biofuel and still make a profit. Some argue that this is a bad distortion of the market. There have been thousands of scholarly papers analyzing how much energy goes into making ethanol from corn and how that compares to the energy in the ethanol. Government distortions can make things happen that would not make sense in a free market.
A World Bank policy research working paper concluded that biofuels have raised food prices between 70 to 75 percent. The "month-by-month" five year analysis disputes that increases in global grain consumption and droughts were responsi
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