Biofuels are changing agricultural economics

Biofuels are changing agricultural economics according to the OECD and the UN’s Food and Agriculture Organisation in a report on ICIS News.
(Disclosure: I work for ICIS: About ICIS)
This is good news for farmers and probably bad news for everyone else.
One of the reasons that inflation has been so low for so long in the UK is that large supermarkets with considerable buying power have been able to squeeze a lot of the value in crops that farmers historically have been able to keep for themselves.
For example, the price of milling wheat in the UK has dropped from £120/tonne in 1990 to around £83/tonne in 2006. During that time the area occupied by large supermarkets has increased dramatically and the price consumers pay at supermarkets has increased much more slowly than the rest of the economy (see table 9).There are other factors of course, but the price your biggest customer is prepared to pay is important in the price you get as a producer.
The big arable producers get about a third of the EU’s farming subsidies under a policy instituted in the 1960s designed designed to stop hill farmers from starving. On the whole the EU should view this news a victory for the European Union’s Farming policy, which has been trying to improve the lot of rural communities for many years.
There are two questions though, as almost half of the world’s population now lives in cities and has limited access to land to grow their own crops, how do they feel about rising prices? Are the farming methods sustainable in the longer term?
View the OECD report

, , , , , , , , , , ,

Leave a Reply