labels: Economy - general
Curbing biofuel cultivation can reduce food prices by 20 per cent: International Food Policy Research Institute news
19 May 2008

New Delhi: Global food prices could come down by 20 per cent by next year if biofuel production is stopped completely across the world, says US-based think-tank International Food Policy Research Institute (IFPRI) has said in its latest report even as it acknowledged that the contribution of biofuel production to the rise of wheat and rice prices had been only 22 per cent.

The report, Biofuels and grain prices: impacts and policy responses, said if biofuel production was frozen at 2007 levels for all countries and for all crops used as feedstock, maize prices are projected to decline by 6 per cent by 2010 and 14 per cent by 2015 and if demand for biofuels from food crops were abolished altogether, prices of key food crops would drop more significantly. By 2010, maize prices are expected to fall by 20 per cent, wheat by 8 per cent and sugar by 12 per cent, the projected.

To keep biofuel production from further worsening the food-price crisis, IFPRI has suggested removal of ethanol blending, mandates and subsidies and ethanol import tariffs in the US together with removal of policies in Europe promoting biofuel, in the short run,  as steps for lowering food prices.

But for the longer term, the report said it was even more critical to focus on increasing agricultural productivity growth and improving developing-country policies and infrastructure related to the storage, distribution and marketing of food.
Interestingly, the IFPRI report also said that factors like crops being hit by bad weather in major producer nations like Australia, poor government policies and higher fuel costs had had a greater impact on prices.

The demand for biofuel is estimated to be resaponsible for pushing up prices of wheat by 22 per cent and rice by 21 per cent during the seven years from 2000 to 07, while the overall impact on all grain prices is estimated to be about 30 per cent, the report Biofuels and grain prices: impacts and policy responses revealed.

Biofuels have had the highest impact on the price of maize from which the US makes ethanol, which rose by 21 per cent as rising oil prices lead to greater demand for biofuels, IFPRI said. It added that the role of biofuel policies in the food-price hikes has become particularly controversial.

Various pressures on global grain markets have contributed to the rapid increase in prces over the past sevral years, said Mark W Rosegrant, who authored the report, adding that biofuel have been a major contributor to pushing up grain prices. The rapid increase in demand for production of biofuels, especially from maize and sugarcane, has had a number of effects on grain supply-and-demand systems, he said.

IFPRI warned that it the current rate of biofuel production were to continue, it could undernmine the availability of food in developing countries , wirth a rise in the number of malnourished children, even though agricultural value-added in these regions would also accelerate as a result of higher farm incomes.


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Curbing biofuel cultivation can reduce food prices by 20 per cent: International Food Policy Research Institute