Two steps forward, five steps back: World Bank confirms biofuels major reason for higher food prices
July 29, 2008
Large increases in biofuels production in the United States and Europe are the main reason behind the steep rise in global food prices, a top World Bank economist said in research published today.
World Bank economist, Don Mitchell, concluded that biofuels and related low grain inventories, speculative activity, and food export bans pushed prices up by 70 percent to 75 percent.
The remaining 25 percent to 30 percent was due to a weaker U.S. dollar, higher energy costs and related rises in fertilizer and transport costs, he wrote.
The research corresponds somewhat with the International Monetary Fund, which estimated in May that biofuels accounted for 70 percent of the increase in maize prices and 40 percent in soybean prices.
The United States is the largest producer of ethanol from maize and is expected to use about 81 million tons for ethanol in the 2007/08 crop year. Meanwhile, Canada, China and the European Union used roughly 5 million tons of maize, which was about 11 percent of the global maize crop.
The use of maize for ethanol in the United States has global implications because the U.S. produces about one-third of the world’s maize and two-thirds of global exports, and used 25 percent of its production for ethanol in 2007/08.