Biofuels and policies to ramp up food prices, say OECD and FAO

17 June 2011 15:26  [Source: ICIS news]

HOUSTON (ICIS)--Global food prices are set to continue to remain high and volatile in the near term, partly driven by biofuel demand and national policies, the Organisation for Economic Co-operation and Development (OECD) and the UN’s Food and Agriculture Organization (FAO) said in a joint report on Friday.

“The use of agricultural output as feedstock for biofuels will continue its robust growth, largely driven by biofuel mandates and support policies,” they said.

By 2020, an estimated 13% of global coarse grain production, 15% of vegetable oil production and 30% of sugar cane production will be used to produce biofuels, the groups said.

Higher oil prices are set to drive use of biofuel feedstocks “and at sufficiently high oil prices, biofuel production in many countries becomes viable even in the absence of policy support,” their joint statement read.

Increasing links to energy markets through inputs such as fertiliser and transportation, and through biofuel feedstock demand, are transmitting price volatility from energy to agricultural markets, they said.

The groups also said that the removal or reduction of policy distortions, such as restrictions on imports and exports or biofuel subsidies and mandates, could reduce price volatility on food and agricultural products markets.

The full report is available on the OECD website.

In related industry news, the US Senate voted this week to end a $6bn (€4.26bn) annual subsidy for corn (maize) ethanol.

($1 = €0.71)

Check out Doris de Guzman’s Green Chemicals Blog for views on sustainability issues

By: Stefan Baumgarten
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