The Appetite for Biofuel Starves the Poor

by Benjamin Senauer

The evidence linking biofuel production to rising food prices can't be ignored. Between the start of 2002 and early 2008, basic global food commodity prices rose by 220%. The global production of biofuels - ethanol and bodiesel - rose from less than 8m gallons in 2004 to an estimated 18m gallons in 2008. The most rapid increase has been in the production of ethanol derived from corn in the US: rising from about 3.5m gallons in 2004 to an estimated 9m in 2008. This year ethanol production is forecast to consume 30% or more of 2008's entire US corn crop.

Because of the surging price of agricultural commodities, Josette Sheeran, the executive director of the World Food Program, has warned that a "tsunami of hunger" is sweeping through the poorer countries of the world. Robert Zoellick, the president of the World Bank, has said that as many as 100 million people in the world have been forced into poverty and hunger because of the dramatic increase in food prices. These are people who live on the equivalent of less than $1 a day and whose households spend 70% or more of their meagre budgets on basic food staples. A debate is raging over the role biofuels, especially corn-based ethanol, have played in increasing food prices, and hence in the rising number of people going hungry.

Ed Schafer, the US Secretary of Agriculture, has said that biofuels account for only a few percent of the rise in the price of food, an estimate that would seem unbelievably low. One of the most reliable independent estimates comes from the International Food Policy Research Institute (IFPRI). IFPRI maintains the most sophisticated model of global agricultural commodity supply and utilization, referred to by the acronym Impact. Based on that model, IFPRI estimates that 30% of the increase in the prices of the major grains is due to biofuels. And now we learn that the World Bank's own unpublished forecasts suggest that biofuels have forced global food prices up by 75%.

The increasing US output of ethanol, by raising the price of corn, pulls land from the production of other crops and leads to substitutions elsewhere, so more wheat and other grains may be used to feed livestock. Moreover, for many countries food price inflation is so high that it has become a serious political problem. There have been food riots and protests in over 15 developing countries. A number of major food-producing countries have restricted their agricultural exports in an attempt to hold down the increase in domestic prices. India and Vietnam, usually major rice exporters, have cut off exports, thus reducing the global supply and pushing rice prices through the roof on world markets.

Grains are the staple food of most people in the developing world, although which particular cereal depends on the region. We can combine IFPRI's estimate that biofuels account for 30% of the rise in grain prices and the World Bank president's figure of 100 million more hungry people due to higher food prices. This combination suggests that biofuels are responsible for 30 million more people going hungry in the world. The IFPRI model also allows us to estimate the number of malnourished children less than age five under various conditions. Based on the model there are some 2.4 million more malnourished pre-schoolers in the developing countries in 2008 due to the impact of biofuels. Current research, that I and colleagues are working on, suggests that 390,000 additional children under the age of five will die because of this increase in malnutrition due to biofuels. If current biofuel development trends continue, child deaths will rise to 475,000, almost one-half million by 2010. If the leaked World Bank figures are more accurate, then that figure could be even higher.

Oxfam has called for a moratorium on biofuel mandates, and an end to subsidies - under the latest US farm bill the ethanol subsidy is 45 cents per gallon. Even the International Monetary Fund calls for a re-examination of these subsidies. The biofuel policies of the presumptive candidates for the US presidency have received little attention so far. However, both Barack Obama and John McCain need to re-examine their positions in light of the devastating impact biofuels are having on global hunger.

Benjamin Senauer is a professor of applied economics at the University of Minnesota. These are the personal views of the author and do not necessarily reflect the position of the University of Minnesota.
© Guardian News and Media Limited 2008