Food and Biofuels

The world is currently experiencing tremendous inflation in food prices. As a report in a recent issue of The Economist (December 8, pp. 81 – 83) argues, there are two major causes of this global food inflation (not to deny the potential for other factors as well – and see my note below on the contribution of oil prices to food inflation).

One of these contributing factors is actually a side effect of a positive development. The level of affluence has risen dramatically in China and India and some other developing nations in recent years. As in already developed countries, affluence has some negative consequences, e.g. greater environmental impact from higher per capita energy consumption. Higher affluence has also led to a boom in meat eating in China and India – The Economist reports that meat-eating in China went from 20 kg of meat per capita per year in 1985 to more than 50 kg per capita per year now. More meat equals more grain grown for feed equals (unless tremendous, even stupendous, quantities of land were put into grain production – causing a whole new set of ecological problems) higher prices for grain.

The second major cause of current global food inflation is the diversion of enormous amounts of grain, especially maize, to subsidized biofuel production in places like the U.S. This has resulted in an increase in maize prices, which alone contributes to food inflation, but with the further result that many farmers have switched from cultivating other grains to maize, much for biofuel purposes, further contributing to food inflation.

An article, “Biofuels: Danger or New Opportunity for Africa?,” makes clear that the problem (to the extent that food inflation is a problem – The Economist report argues that with increased food prices, some farmers, including some in the developing world, will benefit, depending on how food inflation is managed by governments) is not the use of biofuels per se.

The “Biofuels” news article reports on a conference on biofuel and food held in Ouagadougou, Burkina Faso, where a number of perspectives on biofuels were presented. Many voices call for cautious development of biofuel production in Burkina Faso and other African nations.

Within this framework of caution, some individuals expressed hope for biofuel development in Africa for a variety of reasons. (1) In non-oil-producing countries, like Burkina Faso, biofuels could potentially provide a lower price source of fuel than oil imports, given the current astronomical price of oil. (It seems clear to me, and I was surprised that the report in The Economist didn’t deal with this, that global oil prices are a major contributor to food inflation in two ways: [a] increased transportation cost due to higher oil prices adds to the cost of all commodities; [b] the high price of oil is the main spur for biofuel development.) (2) Biofuel and food aren’t mutually exclusive. For example, biofuel byproducts can still be used for feed for livestock or for fertilizer. Further, biofuel need not be produced strictly from edible grains. Brazil’s sugar cane (edible, but not a grain) provides a far more efficient source for biofuel production than North America’s maize, and for countries like Burkina Faso, biofuel might be best produced from non-edible plants grown on land less well suited for direct food production purposes. (3) Biofuels don’t have to fuel everything in order to be useful – they can be used strategically. For example, in poor countries, diverting small proportions of crops to biofuel production specifically to fuel tractors and other agricultural equipment could be a way to simultaneously increase the scale of production and have agricultural production fuel itself.

Again, the problem isn’t biofuels per se, but the diversion of large portions of the world’s food supply (especially North American maize) into fuel production in a context of trade and other policies that stymies more efficient and sensible biofuel production.