August 02, 2010
World Bank reverses: “The effect of biofuels on food prices has not been as large as originally th
Published in Biofuels Digest
In Washington, a newly released report from the Development Prospects Group at the World Bank, “Placing the 2006/08 Commodity Price Boom into Perspective”, concludes that “…the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors (the so-called “financialization of commodities”) may have been partly responsible for the 2007/08 spike.” The authors added that ““We conclude that a stronger link between energy and non‐energy commodity prices is likely to have been the dominant influence on developments in commodity, and especially food, markets.”
The authors stated: “Worldwide, biofuels account for only about 1.5 percent of the area under grains/oilseeds. This raises serious doubts about claims that biofuels account for a big shift in global demand. Even though widespread perceptions about such a shift played a big role during the recent commodity price boom, it is striking that maize prices hardly moved during the first period of increase in US ethanol production, and oilseed prices dropped when the EU increased impressively its use of biodiesel. On the other hand, prices spiked while ethanol use was slowing down in the US and biodiesel use was stabilizing in the EU.”
The authors added: “Fiscal expansion in many countries and lax monetary policy created an environment that favored high commodity prices. The depreciation of the US dollar—the currency of choice for most international commodity transactions— strengthened demand (and limited supply) from non‐US$ commodity consumers (and producers).”
Reaction from RFA
Bob Dinneen: “In reversing course, this World Bank report reaffirms the marginal role biofuels play in world commodity and food prices. Volatile oil prices, speculation, and adverse weather conditions all played far more significant roles in driving commodity prices to record and near record prices. This report should silence critics in the food processing industry, the livestock industry, on Capitol Hill, and anywhere else that sought to portray ethanol as the boogeyman. With this phony food and fuel discussion put behind us, perhaps a real conversation about America’s energy future can ensue.”
Reaction from Growth Energy
Tom Buis: “The erroneous World Bank report from two years ago was the study most often trumpeted by those who benefitted from perpetuating the food vs. fuel myth.”
“I applaud the World Bank for admitting the error of their ways and setting the record straight. They have dispelled the myths and lies perpetuated by those who tried to say there was a “food-versus-fuel” issue. This study clearly shows that the notion of food-versus-fuel was simply wrong . In fact, this study confirms what we’ve known for some time – the impact of ethanol production on food prices is minimal and other factors, including increased oil prices, were the main drivers in the rise of food prices.
“Food-versus-fuel has always been and will always be nothing more than a myth. We hope that this report will encourage others who have relentlessly perpetuated this untruth to admit their mistakes and put an end to this false debate.”
The full ....
