World Bank reports biofuels behind food price hikes, but is it true?

Biofuels have caused world food prices to increase by 75 per cent, according to the findings of an unpublished World Bank report published in The Guardian newspaper on Friday. The daily said the report was finished in April but was not published to avoid embarrassing the US government, which has claimed plant-derived fuels have pushed up prices by only three per cent.

The report's author, a senior World Bank economist, assessed that contrary to claims by US President George W. Bush, increased demand from India and China has not been the cause of rising food prices. Droughts in Australia have also not had a significant impact, it added. Instead, European and US drives for greater use of biofuels has had the biggest effect. The European Union has mooted using biofuels for up to 10 per cent of all transport fuels by 2020 as part of an increase in use of renewable energy. All petrol and diesel in Britain has had to include a biofuels component of at least 2.5 per cent since April this year. It added that the drive for biofuels has distorted food markets by diverting grain away from food for fuel, encouraging farmers to set aside land for its production, and sparked financial speculation on grains. The report however said that Brazil's transformation of sugar cane into fuel has not had such a dramatic impact. [End of report]

So could biofuels actually be the real reason behind the recent food price hikes? Before we explore the issue any further, you should know what biofuels is all about and why it is becoming more popular nowadays. Biofuels are organic fuels made from plants and vegetables such as soya bean, corn or sugar cane. It is actually an alternative source for diesel and it is much cleaner and greener to use unlike the fossil fuels. Hence, its popularity. However, producing biofuels also have its disadvantage. Since they requires plants and vegetables to produce, more supplies of food will be needed in producing the fuel and when this happen, the supply of food that are intended for human consumption will be reduce, hence the increase in food price. The use of biofuels is more evident in America and in Europe. Just last year, the U.S. Congress mandated a fivefold increase in the use of biofuels. With the recent hike in food prices, there has been a lot of debate about whether the use of biofuels are contributing to the hikes. Many political leaders from poor countries certainly think so, contending that these fuels are driving up food prices and starving poor people.

In some countries, the higher prices are leading to riots, political instability and growing worries about feeding the poorest people. But is it true that biofuels are the reason for the recent hike? Many specialists in food policy agrees with it but there are other possible factors that might contribute to the problem as well such as droughts and rapid global economic growth that has created higher demand for food. According to the report by the World Bank however, the droughts in Australia has not had a significant impact on the price. I am unable to find any statistics on how much food production are affected by the droughts so I cant tell whether the World Bank is correct but in some way, I have to say that the droughts have contributed to the price hikes. I went to do some research and I found out that the International Food Policy Research Institute in Washington suggests that biofuel production accounts for a quarter to a third of the recent increase in global commodity prices. The Food and Agriculture Organization of the United Nations meanwhile predicted late last year that biofuel production, assuming that current mandates continue, would increase food costs by 10 to 15 percent. There was also a seperate report by the World Bank that said global food prices have increased by 83 percent in the last three years.

If you combine all that statistics together, it seems to me that the notion of biofuels being the main culprit of the recent food price hikes is indeed true. But there are still some sceptics that argue that is not the case. Some of them are saying that development groups like the World Bank and many foreign governments have done little to support agricultural development in the last two decades. They also argued the fact that the recent food crisis have only concerned mainly rice and wheat, neither of which is used as a biofuel and that it is due to the global demand that has soared. I believe they have a point there because it is those two crops that are most affected by the price hikes so it could be due to the demand that has soared. I still can't decide whether biofuels is the main reason for the hikes because there are many factors that you have to take into account. There is no doubt that biofuels can be considered as one of the factors for the problem. The debate over whether to increase or decrease biofuel production is deeply rooted in the strategy to combat the global food crisis. I believe most people will agree that the two are linked, but how strong that link actually is remains in question.

I will always support any ideas to combat global warming or creating a cleaner and greener environment, but if it is a choice between saving the planet and saving the people, I would definitely choose the latter. We can still survive if the use of biofuels does not exist as there are other ways to make the planet a better place to live in. I'm not sure if the decrease in biofuels production will help to ease the problem but whatever it is, the important thing now is to find a solution to solve the current food crisis. The challenge now is to find a way to incorporate biofuels into the global economy without driving up food prices and advancing deforestation or we will have to continue living with the consequences.

*The report was taken from AFP.