(Adds industry comment)
By Lesley Wroughton
WASHINGTON, July 28 Large increases in biofuels
production in the United States and Europe are the main reason
behind the steep rise in global food prices, a top World Bank
economist said in research published on Monday.
World Bank economist Don Mitchell concluded that biofuels
and related low grain inventories, speculative activity, and
food export bans pushed prices up by 70 percent to 75 percent.
The remaining price rise reflected a weaker U.S. dollar,
higher energy costs and related rises in fertilizer and
transport costs, he wrote.
An unfinished version of the research that surfaced in news
stories sparked a heated debate earlier in July, with trade
groups for the ethanol industry calling the 75 percent figure
"a stretch" and others saying it confirmed the dangers of
current biofuels policies.
The findings by Mitchell, a widely respected agricultural
economist, are controversial because they goes beyond most
other estimates for the impact of biofuels on rising food
Still, his findings correspond somewhat with the
International Monetary Fund, which estimated in May that
biofuels accounted for 70 percent of the increase in maize
prices and 40 percent in soybean prices.
The Bush Administration, on the other hand, has estimated
that biofuel production pushed food prices higher by 2 percent
to 3 percent. Hoping to wean the country off foreign oil,
Washington has boosted incentives and mandates for alternative
fuels made from food crop.
Mitchell said without the increase in biofuels production,
global wheat and maize stocks would not have declined, oilseed
prices would not tripled and price increases due to other
factors, such as drought, would have been more moderate.
Also, food export bans by countries trying to preserve food
supplies and speculative activities would not have occurred
because were in response to rising prices.
"The large increases in biofuels production in the U.S. and
EU were supported by subsidies, mandates and tariffs on
imports," Mitchell said in the research, which looks at rapid
rises in food prices since 2002. "Without these policies,
biofuels production would have been lower and food commodity
price increases would have been smaller."
Mitchell said biofuels policies that encourage subsidized
production need to be rethought because they are hurting poor
Bob Dineen, president of the Renewable Fuels Association,
said the report showed a bias by the author against biofuels
and underestimates the impact of higher energy prices and a
weak dollar on higher food costs.
"Such a simplistic approach fails to accurately and
honestly account for the myriad of factors driving food costs
higher," Dineen said. "I encourage the author and the World
Bank to revisit the issue without bias, taking into account the
increasingly significant role biofuels are playing in reducing
global oil demand."
Mitchell said the increase in grain consumption in
developing countries was moderate and did not lead to the large
Growth in global grain consumption, excluding biofuels, was
only 1.7 percent a year from 2000 to 2007, while yields grew by
1.3 percent and area grew by 0.4 percent, which would have kept
global demand and supply roughly in balance, he said.
The use of maize for ethanol in the United States has
global implications because the U.S. produces about one-third
of the world's maize and two-thirds of global exports; it used
25 percent of its production for ethanol in 2007/08.
Mitchell, however, said Brazil's sugar-based ethanol did
not push food prices appreciably higher because Brazilian sugar
cane output increased and sugar exports nearly tripled since
The increase in cane production has been large enough to
allow sugar output to rise from 17.1 million tons in 2000 to
32.1 million tons in 2007 and exports to increase from 7.7
million tons to 20.6 million tons.
(Editing by Leslie Adler)