Food Crisis and Biofuels

As the world’s food prices hit a record high in January, driven by the price increases in wheat, corn, sugar and oil; Egypt’s protestors demanded and succeeded in the resignation of Hosni Mubarak’s 30-year rule.

The food inflation that exceeded the price spike of 2008, pushed millions further into poverty as Egyptians have historically spent over 40% of their income just on food. According to the UN, grain in particular, is more expensive than ever, with corn prices up 53% in 2010, wheat up 47% and rice now at its highest level in more than 2 years.

Various factors are being blamed and economists are citing a combination of influences. Unusual weather events are stated as a key contributor, namely the sweltering heat wave that struck Russia in 2010, the world’s largest wheat supplier, causing the Russian government to halt grain exports for the year, shooting up the price of bread in Tunisia and Egypt.

One thing is certain, as political unrest spreads to North Africa, protestors showed the debilitating effect of high food prices on a society. The struggle for basic food however, reaches far beyond Egyptian borders, nearly 1 billion people world-wide suffer from hunger. Untamed weather in other parts of the world contributed to global food shortages, heavy rains in Australia damaged wheat crops, flooding in Pakistan damaged grain crops and drought is currently threatening wheat crop in parts of China. According to NOAA (National Oceanic and Atmospheric Administration), 2010 tied 2005 with the hottest year on record and 2010 was also the wettest year on record, undeniably contributing to world-wide food shortages.

Population growth has also contributed to the growing demand for food. According to the World of Food Science, since 2000 the population growth has grown by more than 800 million and continues to grow by more than 80 million annually.

According to USAID, “Several factors contributed to the rapid spike in global food prices, including increased consumer demand for food, oil and energy supplies among emerging markets such as China and India, leading to rising energy costs, lower crop yields resulting from adverse weather conditions, and higher corn prices stemming from increased biofuel production.”

The global diversion of cropland to produce biofuels rather than food has been severely criticized and listed as a major factor in the price spikes. Lester Brown, President of the Earth Policy Institute recently reported, “The production of Ethanol uses 4.9 billion bushels of corn in the U.S., that’s enough grain to feed 350 million people.”

But many believe Biofuels cannot be blamed for the recent food crisis. According to Alfonso Rivera Revilla, Chairman of the Insight Group PLC, “Not all Biofuels are equal; the Moringa oleifera tree used as biofuel has a higher recovery and quality of oil than other crops, the tree has no direct competition with food crops. It has also no direct competition with farm-land as it can be grown for food and fuel at the same time. The Moringa tree thrives in land where most agricultural produce would not survive and apart from biofuel its greatest contribution is its nutritional value to underdeveloped countries.”

In a recent report Brian Doidge, on behalf of the Ontario Agri-Food Technologies, stated criticism against Biofuels fails to represent the truth. He explains what many fail to realize. “When corn is used to make ethanol, one third of a bushel of corn ends up as dried distiller’s grains (DDG) which is used as animal feed. Therefore, although some corn acres may have been diverted away from feed grains to biofuel production, one third of those acres still end up as feed.”

Doidge also dispels the common argument that biofuel production diverts acres away from oilseeds, wheat and rice production. According to data from the Foreign Agricultural Service of the United States Department of Agriculture, the world acreage of nearly all major crops either has increased or stayed the same since 2000. “Corn acreage has increased 15%, oilseed acreage is up 11.4% and rice acreage is at a record high of 381.1 million acres, an increase of 1.7% since 2000, wheat acres have remained steady”. This data does not substantiate the argument that acres of food grains and oilseeds are suffering. Doidge says rising oil prices have played a role in the crises and as India and China increased their demand for oil, oil prices soared more than food prices.

Contact Information

Ezelna Jones

Marketing Manager

Insight Group PLC

Contact via E-mail