The answer to this question seems more complicated that it appears; prices have been a battleground for those in favour or against biofuels. Many studies have been carried out to prove or disprove such impacts, and are often exagerated. There is abundant literature but with different outcomes due to different methodologies, use of data, scenarios, etc; and often defending a particular point of view rather than evidence-based. Generally, it can be said that the growing evidence points towards the impacts of biofuels on food prices are relatively weak.
The debate affecting the spike on food prices, particularly during 2006-2008, was exagerated, and was largely based on fragmented data. Many studies attribute the food price spikes in 2008 primarily to oil prices, economic growth, currency exchange rates, trade policies[115a][115b] as well as speculation in food commodities.
The debate on food prices, however, is unlikely to go away as it is not a black and white issue; it is clouded with claims and counter claims. They are also large regional, national and global variations in crops, climate change, etc.
For example, it can be oberved in Figure 1, that from 2008-2016 ethanol production increased rapidly, while FAO’s Food Index Price, declined sharply. This demonstrates that ethanol production is not the main driver of food prices. This chart uses the latest world ethanol fuel production data from F O Licht’s 2017 forecast. Similar conclusions apply to biodiesel. The recent Globiom report also highlighted that ethanol production from maize and wheat for example have limited price impact on cereals and food prices are unaffected.
Figure 1. Ethanol production and food prices. Source: http://globalrfa.org/news-media, 31 May 2017
The problem with multiple scenarios is that they ignore, to a large extent, the potential of the technology to transform agriculture as well as huge food waste on a global level. For instance, FAO estimated that one-third of all food produced is wasted. There is no question that current agricultural systems are unsustainable, suffer from gross underinvestment, are wasteful, and that social and economic injustice is at the core of many problems.
It is well established that feedstocks used for biofuels do not typically come from staple food stocks. The largest market for maize and wheat used for biofuel production is animal feed. Sugarcane, the major source of ethanol fuel in Brazil, also provides many other benefits (e.g. heat and power, animal feed, yeasts, etc.) that have been the main vehicle for modernizing agriculture and increasing food production in the country.
It would be unrealistic to say biofuels do not impact food prices; there is no question that some impacts are inevitable as demand impacts any commodity, but it is also important to keep in mind that higher commodity prices are not bad per se. They can have a positive impact if they are translated into higher income for rural communities, as 75% of the poor in developing countries live in rural areas, and support investments needed in agriculture. For example, FAO has repeatedly reported that under-investment in agriculture is a problem that seriously handicaps food production in the developing world, and that this, coupled with rural poverty, is a key driver of world hunger.
Other authors have also stated that food commodities prices also increased due to other reasons including “global supply and demand trends, regional or commodity specific supply disruptions, changes in the value of the US$, macroeconomic issues such as recession or financial crisis, trade policy changes,” and also, but with less influence, biofuels. Furthermore, to produce a full analysis of the impacts of food prices on food security is necessary to get detailed food price data and apply household survey data on both the quantity and the quality of foods. Availability of this data is limited in developing countries and would require significant effort to obtain for the purposes of additional analysis.References
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