New report lays food price hikes at oil’s door

Two senior economists at the World Bank believe it is high oil prices which are the most important driver of the increase in global food prices.

The report, put together by John Baffes and Allen Dennis, also finds that, under a mandated ethanol/gasoline mixture, ethanol and maize prices would decline.

The European Renewable Ethanol Association (ePure) backs this analysis as the European biofuels debate enters a crucial stage, in which billions of euros and thousands of jobs are at stake. EPure believes the debate over biofuels will only benefit from factual and scientific analysis of, among others, economic data.

Baffes and Dennis concluded: ‘Oil prices account for almost two thirds of the (food) price changes from 1997-2004 to 2005-12 [...] in contrast to Wright (2012) who argued that low stocks during 2007/08 - at a time of strong biofuel demand and increased incomes by China and India - were the key causes of the post-2007 grain price increases’.

The report adds: ‘And, to the extent that biofuels affect prices [...] our results imply that their effect on food prices is not as strong as has been reported in previous studies (for example, Mitchell 2008)’.

EPure states the European renewable ethanol industry has consistently explained that it produces as much food as ethanol from crops that are not typically used for human consumption, so it believes this report comes at a time when more and more policymakers in Europe recognise the important role of valuable co-products of ethanol production.

It also points to the high protein animal feed that the industry produces could help Europe to lower imports, which currently stands at  70%.

‘While some in the debate paint a negative picture of biofuels, the World Bank analysis gives us a movie by detailing the food price developments over a 15 year period. I hope that EU decision makers will recognise these findings and take them into account going forward,’ says Rob Vierhout, secretary general of ePure.