The other global crisis: rush to biofuels is driving up price
By Paul Vallely
Saturday, 12 April 2008
The world's most powerful finance ministers and central bankers are
meeting in Washington tomorrow; but as they preoccupy themselves with
the global credit crunch, another crisis, far more grave, is facing
the world's poorest people.
A dramatic rise in the worldwide cost of food is provoking riots
throughout the Third World where millions more of the world's most
vulnerable people are facing starvation as food shortages grow and
cereal prices soar. It threatens to become the biggest crisis of the
This week crowds of hungry demonstrators in Haiti stormed the
presidential palace in the capital, Port-au-Prince, in protests over
food prices. And a crisis gripped the Philippines as massive queues
formed to buy rice from government stocks.
There have been riots in Niger, Senegal, Cameroon and Burkina Faso and
protests in Mauritania, Ivory Coast, Egypt and Morocco. Mexico has had
"tortilla riots" and, in Yemen, children have marched to
draw attention to their hunger.
The global price of wheat has risen by 130 per cent in the past year.
Rice has rocketed by 74 per cent in the same period. It went up by
more than 10 per cent in a single day last Friday - to an all-time
high as African and Asian importers competed for the diminishing
supply on international markets in an attempt to head off the mounting
social unrest. The International Rice Research Institute warned
yesterday that prices will keep going up.
The buffers stocks of staple foods that governments once held are
being steadily exhausted.
Rising prices have triggered a food crisis in 36 countries, says the
UN Food and Agriculture Organisation. The hike in prices means the
World Food Programme is cutting food handout rations to some 73
million people in 78 countries. The threat of malnutrition on a
massive scale is looming.
The impact is beginning to be felt in the rich world, too. More
expensive wheat has caused large rises in the cost of pasta and bread
in Italy where consumer groups staged a one-day strike that brought
pasta consumption down 5 per cent. The price of miso, a fermented rice
and barley mixture, is up in Japan. France and Australia have launched
national inquiries into rising food prices and are pressing food
producers and supermarkets to absorb price rises. In Britain, the
price of bread is rising in line with the cost of wheat.
Governments have begun to negotiate secretive barter arrangements as
the price of agricultural commodities leap to record highs. Ukraine
and Libya are close to a deal on wheat. Egypt and Syria have signed a
rice-for-wheat swap. The Philippines has just failed in a rice deal
All across the world, cereals, meat, eggs and dairy products are
becoming dearer. "Food prices are now rising at rates that few of
us can ever have seen before in our lifetimes," said John Powell
of the World Food Programme. Prices are likely to remain high for at
least 10 years, the Food and Agriculture Organisation is
A complex interaction of factors has provoked the panic among dealers
in international food markets.
Diets are changing radically in nations such as China, India, Brazil
and Russia, where economic growth has boosted meat consumption. In
China, it is up by 150 per cent since 1980. In India, it has risen by
40 per cent in the past 15 years. The demand for meat from across all
developing countries has doubled since 1980.
Because cattle and chickens are fed on corn - it takes 8kg of grain
to produce 1kg of beef - the price has risen.
The new market for biofuels has raised grain prices. Corn is being
used to produce energy and the market is anticipating hugely increased
production in the coming decade. George Bush wants 15 per cent of
American cars to run on biofuels by 2017, which will mean trebling
maize production. Europe has a set a transport fuels target of 5.75
per cent from biofuels by 2010. As a result, the price of corn has
begun to track that of oil quite closely.
The soaring cost of oil, which last week topped $105 (£53) a barrel
for the first time, has another impact. It increases the price of
fertiliser, and also the costs of food processing and transport.
Climate change is taking its toll. Droughts and floods are affecting
Floods in central China this year displaced millions of people and
devastated rice and corn crops. Overall China's grain harvest has
fallen by 10 per cent over the past seven years. Last year, Australia
experienced its worst drought for more than a century, causing the
wheat harvest to fall by 60 per cent. The UK wheat harvest is expected
to be 10 per cent down this year, partly because of the flooding.
Worldwide, an area of fertile soil the size of Ukraine is lost every
year because of drought, deforestation and climate instability.
There is also increasing demand from a rising world population which
is expected to grow from 6.2 billion today to 9.5 billion by 2050. The
World Bank predicts global demand for food will double by 2030.
Government policies do not help: the rich world subsidises agriculture
not to feed the world but to enrich its farmers.
There is an increasing recognition of the gravity of all of this among
the leaders of the industrialised world. On Thursday, Gordon Brown
called on the Japanese Prime Minister, Yasuo Fukuda, the current
chairman of the G8, to devise an international plan to deal with
rising food prices with the World Bank, the IMF and the UN.
There is increasing concern about the rush to biofuels. Britain's new
chief scientist, Professor John Beddington, has said cutting down
rainforest to produce biofuel crops was "profoundly stupid".
It was, he said, "very hard to imagine how we can see a world
growing enough crops to produce renewable energy and, at the same
time, meet the enormous increase in the demand for food".
Lennart Båge, the president of the UN's International Fund for
Agricultural Development, suggested that those opposed to GM crops
should take another look at the productivity gains they can unleash
and bring changes as massive as the "green revolution" of
the 1960s, when crop yields in India and other developing nations
jumped because of of better seeds, fertilisers and improved
That change brought down food prices, freeing millions from
hunger. If world leaders cannot come up with something similar again,
the food riots could spread across the globe.