It is becoming rather tiresome, the war of words and press releases as to whether the diversion of millions of bushels of grains to biofuels production has been a major factor in the steep increase in food prices.
The charges and counter-charges range from reasonably rational to downright incredible.
In the latter category, a British newspaper, The Guardian, made public prior to last week's G-8 conference of industrialized nations what it said was a “secret” report by the World Bank that use of grains for biofuels has been responsible for 75 percent of the run-up in food prices. Another 15 percent of the increase was blamed on higher energy and fertilizer prices.
“Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably, and price increases due to other factors would have been moderate,” the report said. The higher prices — up 140 percent between 2002 and February 2008 — have pushed 100 million people worldwide below the poverty line, it said.
The article, quickly disseminated worldwide by news organizations and Internet bloggers, alleged that the report was suppressed by the World Bank “to avoid embarrassing President George Bush” (the U.S. government's estimates have been that biofuels have increased food prices by only 3 percent).
While the story provided choice fodder for groups (among them the Grocery Manufacturers of America) agitating for the U.S. and other industrialized nations to scale back biofuels programs, it turned out that the British newspaper story was somewhat less than accurate.
Donald Mitchell, the World Bank senior economist who wrote the report, said it was only a working paper still undergoing peer review and didn't represent the bank's official position.
A bank spokesperson told the Wall Street Journal's blog, “Environmental Capital,” that the 75 percent figure was “probably at the far end” of estimates of the impact of biofuels on food prices. “Other people talk about ranges of 20 percent, 25 percent — there's some at the lower end that I think are less credible.”
Regardless, it takes a long stretch of the imagination to lay 75 percent, or even 20-25 percent, of the blame for spiraling food prices on the use of grains for biofuels.
While it stands to reason that higher prices for grains — particularly corn, which is a part of so many food products — have had some impact on food costs, by far the greatest contributor to those higher costs has been energy. $140 oil, which touches every aspect of food from seed to supermarket purchase, is the 800-pound gorilla responsible for most of the food price inflation.
Not that it makes a lot of difference to the naysayers, but … in 2007 U.S. farmers produced a record 13.1 billion bushels of corn, 22 percent of which was used for ethanol.
Still, there was enough left to meet domestic needs, achieve record exports, and have a 10 percent surplus.
Had not a single bushel of corn gone to ethanol, food prices would still have risen because of the tremendous burden of $100-plus oil, burgeoning world demand for grains, and crop failures due to drought and other disasters.