US biofuel industry says: don’t blame us for food price hikes

The US National  Biodiesel Board is telling people that the rise in prices at grocery stores is down to the rise in fuel prices not down to the diversion of food crops in the US into fuel. Joe Jobe, the NBB ceo says that the Grocery Manufacturers Association is campaigning to put the blame for higher food prices on the biofuel industry. This echoes a slightly vague story I reported on a couple of days ago that big food is using underground campaigning against ethanol. I asked the author of the original report for more clarity, but he’s not managed to respond yet.

I think they are partly right. In the US (the developed world) the price of ingredients is a smaller proportion of the cost of processed food than it is in parts of the world where processed food is a luxury item. The picture is bigger than the continental landmass of the US.

Rising food prices in the US are more than likely going to be driven by the high cost of fuel, more than the ingredients.

But in a world where demand is increasing, the excess of food production over demand is falling (through drought, raising living standards AND taking grain out of the equation by burning the excess as fuel, one way or another), the price can only rise until demand meets supply.

Unfortunately demand for food is pretty constant and in many parts of the world wages are insufficient to pay for more expensive food grains.

We’ll never know what would have happened if the US hadn’t rushed into ethanol from corn as a short term fix, but it is more than possible that the price of food grains would have been lower if everything else had stayed the same.

Hattip to Domestic Fuel 

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4 Responses to US biofuel industry says: don’t blame us for food price hikes

  1. David B. Benson 24 May, 2008 at 2:14 am #

    I don’t agree with your conclusion, mostly. A major factor has been the continued drought in Australia, impacting both wheat and rice production.

    This food crisis has been building for some time (years?) now; ever since the last time the world had a 90 day supply of foods.

  2. Simon Robinson 28 May, 2008 at 10:47 am #

    Hi David,

    It is interesting that a relatively small grain producer like Australia, with around 1.4% of global producton in 2004 can have such a big effect, when taking a big chunk of a big producer like the US out of the equation has such a marinal effect on food prices. The FAO estimated in 2004 that the US produced 17% of the world’s grains. Last year close to 25% of the US corn crop was used to make ethanol. Ok there is some residual value in distillers’ grains, but that has to be a significant volume of the world’s calories. Or am I barking up the wrong tree?

    Source: http://faostat.fao.org/site/339/default.aspx

    World grain producgtion by country top 10 with Australia 2004
    Rank Country %
    1 China 18.20
    2 US 17.14
    3 India 10.23
    4 Russia 3.36
    5 France 3.11
    6 Indonesia 2.88
    7 Brazil 2.81
    8 Canada 2.32
    9 Germany 2.25
    10 Bangladesh 1.81
    16 Australia 1.39

    Source: http://faostat.fao.org/site/339/default.aspx

    The FAO includes maize (corn) in its definition

    http://www.fao.org/es/ess/rmcrops.asp

  3. David B. Benson 29 May, 2008 at 12:36 am #

    Simon, I think so. For other explanations of the food crisis, which has been building for years, see

    http://www.alternet.org/environment/85433/

    entitled “Vandana Shiva: Why We Face Both Food and Water Crises” and also

    http://www.thenation.com/doc/20080602/bello

    entitled “Manufacturing a Food Crisis”

    Biofuels plays little or no role in either of these analyses, both of which are quite illuminating.

  4. David B. Benson 29 May, 2008 at 1:18 am #

    While I don’t agree with this article from the Council on Foriegn Relations, it does point out the significant number of countries which have stopped or slowed food exports:

    http://www.foreignaffairs.org/20080528faupdate87376/c-ford-runge-benjamin-senauer/how-ethanol-fuels-the-food-crisis.html

    None of those are significant biofuel producers, except possibly India. But India halted rice exports, not a biofuel crop.

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