Awake at the Wheel

A number of recent news stories have portrayed biofuels, primarily corn ethanol, as a leading cause of global food price increases. As builders and supporters of our renewable energy industry, this is a matter we take very seriously. It’s important to have good information so we can understand the impacts of our energy choices.

According to leading commodity experts and economists, biofuels are receiving undue blame. In fact, the food price increases are the result of many complex factors, mainly increased demand for agricultural products in emerging markets (especially China and India), a weak U.S. dollar relative to other currencies, and the rising costs of fuel for producing and transporting crops. In addition, weather-related production decreases worldwide have resulted in less overall supply.
Unfortunately the media is not effective at communicating complex economic drivers, and have erroneously pointed the finger at the renewable energy industry. However economists & global leaders are shedding light on this issue. Here’s what some of them have to say.

• Jim Duffield with the U.S. Department of Agriculture and John Urbanchuk with the global economic analysis firm LECG LLC discuss the true causes of rising food prices http://domesticfuel.com/2008/04/16/economists-discuss-food-and-fuel-prices/

 

• Business Week article discusses the expanding role of speculators in agricultural markets and their effect on price increases.  Greg Warner, analyst with AgResource, says what is happening now in the wheat market is unprecedented. “What we normally have is a predictable group of sellers and buyers—mainly farmers and silo operators,” he says. But the landscape has changed since the influx of large index funds. Fund managers seek to maximize their profits using futures contracts, and prices, says Warner, “keep climbing up and up.”
  http://www.businessweek.com/globalbiz/content/apr2008/gb20080423_366709.htm

 

•  Merrill Lynch commodity strategist, Francisco Blanch, outlines that oil and gasoline prices would be about 15 percent higher if biofuel producers were not increasing their output. Increased output of biofuels reduces the cost of food production & transportation, and lowers prices.

 

• Achim Steiner, UN Under-Secretary General and Executive Director, UN Environment Programme comments that current news coverage blaming biofuels for shortages of food crops are; “simplistic and perhaps short-sighted scapegoats.” He went on to say that the headlines were; “convenient distractions for what is so often in reality poor management at national and international levels. They do, however, point to the inescapable fact that food security is intimately linked to national and international security.”
  http://www.biofuelreview.com/content/view/1549/1/