Biofuels : Why food is becoming more expensive

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The global food crisis

Within the past year, global food prices have risen by 75%. Prices of wheat, soya, oilseeds, maize and rice are now at record levels. The price of wheat has gone up by 130%. In Asia, the price of rice has doubled in just three months. The World Bank has warned that 100 million more people are facing hunger and malnutrition because of rising food prices. The World Food Programme has begun to cut back on food aid programmes. People have taken to the streets against food shortages and unaffordable food prices in over forty countries, including Egypt, Haiti, Bangladesh, Indonesia and Cameroon. Although many countries, including Kenya, Mozambique, Zimbabwe, North Korea and Bangladesh are facing major crop losses because climate change, the current crisis is not caused absolute food shortages: Global grain production reached record levels in 2007 and the UN Food and Agriculture Organisation is predicting even higher production this year.

Source FAO : Crop Prospects and Food Situation, No. 1, February 2008

What is the role of biofuels in the food price crisis?

There are at least four ways in which biofuels contribute to rising food prices:

Firstly, there is the additional demand for grains (and estimated 100 million tonnes in 2007) and vegetable oil, which is growing at a much faster rate than the global demand for food or animal feed.

Secondly, the competition between food and fuel effectively pushes up food prices if oil prices rise, beyond the level which could be explained by rising energy/input costs. The 2007 OECD report “Biofuels: Is the cure worse than the disease” warned: Any diversion of land from food or feed production to production of energy biomass will influence food prices from the start, as both compete for the same inputs.”

Thirdly, food sovereignty is being further undermined and land on which communities in the global South depend for their livelihood is being turned over to agrofuel plantations – involving both food crops and non-food crops. The Indian government, for example, is planning to convert 11 million hectares of what are mainly community lands to jatropha plantations, threatening the livelihoods and food sovereignty of pastoralists, small farmers, indigenous peoples and forest communities, Fertile land in many other countries, including Tanzania and Ghana being appropriated for jatropha.

Finally, agrofuel production and investment are increasing the control of a small number of agribusiness companies, now in partnership with energy companies and joint venture enterprises over food production and food prices, and encouraging even greater speculative investment and profits.

Are biofuels the only reason why food prices are rising and more people are going hungry?

No. As a recent report by GRAIN (http://www.grain.org/articles/?id=39) states states: “We are in a structural meltdown, the direct result of three decades of neoliberal globalisation”.

Worldwide, 75% of agricultural biodiversity has been lost and industrial monocultures are the main cause of soil erosion, freshwater depletion and desertification, thus reducing countries’ ability to grow food. Climate change, which is made worse by industrial agriculture, is already causing regional crop failure, declining yields and regional food shortages. Severe drought in Ukraine, Australia, Canada and elsewhere did impact on global wheat production in 2007. Those impacts can only get worse and threaten global food shortages, if not major agricultural collapse, in future. However, they are not the main cause of the current crisis.

Rising demand for animal feed and for food in China and India have been widely blamed for food price rises, however, those are very gradual, long-term trends and statistics published by the UN Food and Agriculture Organisation in November 2007 suggest that global animal feed consumption is lower in 2007/08 than it was in 2005/06 (http://www.fao.org/docrep/010/ah876e/ah876e02.htm). Rising oil prices are making intensive agriculture more expensive, but the steep rise in profits by companies producing fertilisers and pesticides belie any claims that the crisis can be blamed mainly on oil depletion.

For several decades, healthy, productive and biodiverse farming systems, based on small farmers have been undermined and destroyed by agri-business and biotech companies, with the aid of governments, international institutions, ‘free trade agreements’, and illegitimate ‘debt’. In Brazil, for example, 60% of the rural population has been displaced and forced to migrate to the cities since 1960, whilst agri-business plantations, many of them for European animal feed and for pulp and paper, as well as for ethanol, have replaced food production and agricultural biodiversity. At the same time, governments in the South have been forced to abolish tariffs, subsidies and other measures which protect local farmers. Subsidised food dumping and ‘structural adjustment programmes’ have destroyed the livelihoods of large numbers of small farmers. 70% of countries in the South are now net food importers, most of them as a direct result of those policies.

Within the past year, the credit crunch and stock market declines have attracted ever larger sums of speculative investment into agricultural commodities. Investment funds control up to 60% of the wheat trade on the biggest commodity markets. According to one agricultural financial analyst, large index funds have entered the grain markets and are seeking to maximise profits using futures contracts by acquiring rights over ever greater proportions of world grain production and speculating on rising prices. (www.spiegel.de/international/world/0,1518,549187,00.html)

As a recent report by Food First says: “Though the biofuels boom has exacerbated speculation and high prices, that boom wouldn’t have been possible without a deregulated global market.”

Who profits from the food price crisis?

Whilst an estimated 100 million more people are going hungry in the global South and even in the North, more and more people can no longer afford an adequate diet, profits made by agri-business, by investment funds and by supermarkets are booming. Between 2006 and 2007, profits made by ADM, one of the leading agribusiness firms, rose by 67%, those made by Cargill by 36%, Tesco’s profits have risen faster than ever, 12.3% last year. Agribusinesses profit greatly from raising the prices of fertilisers, pesticides and other inputs, whilst small farmers have to pay those extra costs and many struggle to survive.

What is the EU and UK doing?

Planning to turn much more wheat into ethanol - a 12-fold EU increase by 2016 (see graph showing EU plans). The UK wheat surplus in 2007 was around 0.75 million tonnes. With planned current ethanol refinery expansion, we are headed for a 3 million tonnes deficit by 2010, unless there was a massive expansion of UK wheat production. Already, half of previously set aside land has been put into production, and further land conversion of intensification of agriculture will have disastrous impacts on biodiversity, soil and water quality and availability.

At the same time, the EU continues to push for more agrofuel expansion, as well as pushing through further ‘trade liberalisation’ in the form of European Partnership Agreements and by pushing for a new agricultural trade agreement in the WTO – more of those policies which have created the current crisis.

Source OECD/FAO Agricultural Outlook 2007-2016

The Table below shows the UK planned wheat ethanol expansion by 2010.

Where	Builders	Venture Partners	Opening	Tonnes (million) Wheat	Tonnes (million) ethanol	Litres (million) ethanol
Saltend, Hull	Vivergo Fuels Limited	Associated British Foods (of which British Sugar is a member), BP and Du Pont	2009	1.1	0.33	420.00
Immingham 1	Abengoa Bioenergy		2010	1.10	0.4	400.00
Immingham 2	Bioethanol Ltd	Centaur Grain	2009	0.33	0.10	125.60
Immingham 2B	Bioethanol Ltd	Centaur Grain	Phase 2 after 2009	0.33	0.10	125.60
Immingham 3	Green Spirit Fuels	Humber Biofuels and Wessex Biofuels	2008	0.65	0.20	251.20
Henstridge, Somerset	Green Spirit Fuels		?	0.35	0.11	131.88
TOTAL				3.86	1.24	1454.28

Highlighted values are estimated from other figures
Other plans for new UK ethanol refineries have been announced including by Losonoco and Vireol.

The total wheat required by the refineries already approved/under construction in the UK will be thus be at least 3.91million tonnes of wheat per year on these known plans in the table.

For further information See refinery maps

What are others saying?

"A crime against humanity" - Jean Ziegler, Special UN Rapporteur for the Right to Food, who calls for a 5 year moratorium on biofuel production
"The agrofuels push will exacerbate Africa's climate and food security problems even more" - African NGOs calling for an African agrofuel moratorium
"Our principal objective is to guarantee food sovereignty, as the expansion of the production of biofuels aggravates hunger in the world. We cannot maintain our tanks full while stomachs go empty." - 6 Latin American NGO networks
"We will have a significant gap , and we will need an extra half billion dollars just to meet existing assessed needs." Josette Sheeran, the head of the UN's World Food Programme (WFP), February 25th 2008.

What is our government doing about the situation?

From 15th April 2008, all petrol and diesel will have to be blended with biofuel - the law of compulsory blending.

This will greatly increase the demand for biofuels. This will greatly increase the demand for biofuels. As above, at least 5 large ethanol refineries are being built or planned in the UK to turn around millions of tonnes of wheat every year into fuel that will lead to a UK wheat deficit. Like the EU, the UK government continues to push for agricultural ‘trade liberalisation’ – more of the policies which have caused the current crisis.

Food sovereignty needs to become the principle of agricultural policies:

We need an urgent moratorium on agrofuels from large-scale monocultures, on agroenergy imports and on subsidies, targets and other incentives for agrofuels.

This has to be part of a major policy shift - away from ‘trade liberalisation’, corporate control over food production, the promotion of industrial agriculture and GM.

Agricultural policies need to be based on the principle of food sovereignty. Via Campesina define food sovereignty as “the right of peoples to healthy and culturally appropriate food produced through ecologically sound and sustainable methods, and the right of their governments to define the food and agriculture policies of their countries, without damaging agriculture of other countries. It puts the aspirations and needs of those who produce, distribute and consume food at the heart of food systems and policies rather than the demands of markets and corporations”. There is an urgent need for regulation of international food markets, interventions to stabilise food prices and to build up national buffer stocks.

Food sovereignty in the global South cannot happen without food sovereignty in Europe and elsewhere in the North. Right now Europe relies on importing vast amount of soya and other protein to maintain an unsustainable, intensive livestock industry, on vegetable and fruit imports from the South, and on ever larger monocultures worldwide to fuel our cars and power stations. We need drastic demand reduction for energy, agricultural commodities (in particular animal feed) and forest products in Europe. At the same time, instead of converting land to agroenergy, the protection of all ecosystems and biodiversity and socially just ecological restoration must be paramount if we want to have any chance of stabilising the climate. This also applies to Europe, where habitat destruction and the abolition of set-asides is leading to dramatic and possibly irreversible declines in biodiversity.

Food sovereignty, land reforms, and sustainable, biodiverse farming methods would improve living conditions for people worldwide and greatly increase access to food and could mitigate, not accelerate global warming.

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