Each year, the world demands more grain, and this year the world's farms will not produce it. Millions more people will be malnourished, and hundreds of millions who are already hungry will eat less or give up other necessities. Agricultural production is keeping up in general with the growing demand for food - but it keeps up with the added demand for biofuels only if growing weather is good.
Demand for biofuels is almost doubling the challenge of producing more food. Since 2004, for every additional ton of grain needed to feed a growing world population, rising government requirements for ethanol from grain have demanded a matching ton. Brazil's reliance on sugar ethanol and Europe's on biodiesel have comparably increased growth rates in the demand for sugar and driven up demand for vegetable oil. Biofuels have grown rapidly, from consuming 2 percent of world grain and virtually no vegetable oil in 2004 to more than 6.5 percent of grain and 8 percent of vegetable oil last year. Governments worldwide seek to triple production of biofuels by 2020, and that implies more moderately high prices after good growing years and soaring prices after bad ones. It's pretty simple — corn that could go for food or fuel is diverted to fuel. That influences prices.
The price of corn in your corn flakes and other retail products is so small that even a tripling of crop prices has little effect at U.S. grocery stores. But the world's poor do not eat processed, packaged corn flakes; they spend more than half of their incomes on staples such as corn meal. "Ethanol uses 4.9 billion bushels of corn in the U.S.," says Lester Brown, president of the Earth Policy Institute, an environmental think tank. "That's enough grain to feed 350 million people."
The ethanol industry in the U.S., though, is hitting back against the suggestion that it is pushing up food prices.Growth Energy CEO Tom Buis complained that a "highly well-funded and highly orchestrated campaign of misinformation" was overstating the impact of biofuels on food prices. Yet no one is arguing that biofuels are solely responsible for driving up food prices. Rising demand and bad weather play significant roles — droughts, heat waves and floods could become more common in the future as the climate warms. Speculators who buy up food futures as investments contribute to price volatility, too. But it's clear that in a tighter market, diverting corn and other crops to biofuels will only act to raise prices. Canadian Wheat Board market analyst Neil Townsend said U.S. incentives first offered almost a decade ago to encourage producers to grow corn for ethanol have led to stiffer competition between corn and other crops for limited farmland. With bad weather, rising demand and production problems all conspiring to create pressure on food prices, "there's no wiggle room in the system'' at the moment, he said.
Adding to the crisis was U.S. trade policy: Because they subsidize wheat, corn and a handful of other crops so much, they can offer them cheaper on the world market and “dump” supplies on other countries. This puts farmers in those countries out of business, as they are forced to compete with artificially low prices at the market.
Go back a little further in time in Egypt and the roots of their political crisis can be found with its 1992 land reform. Guided by what many say was U.S. and International Monetary Fund influence, the country’s small farmers who were “registered tenants” became subject to rent increases, in many cases triple what they had been paying. As expected, these small farmers couldn’t afford the steep rent increases and were forced off their land. More than half of all Egyptians live in the countryside, and millions were forced into poverty. Moreover, Egypt itself became more reliant on imports.
In 2009, developed nations promised to provide more than $20 billion to aid agriculture in developing countries; $6 billion of that total was intended for a food security fund at the World Bank. Less than $1 billion of those pledges has been paid.