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Bad juice: World Bank blames biofuels for high food prices

Keith Johnson, Environmental Capital (blog), Wall Street Journal
Just when you thought it was safe to go back in the cornfield, it turns out biofuels are the overwhelming reason food prices around the world have shot up in recent years-not the minor factor in food prices that other recent analyses have found.

That’s what the Guardian reports, after getting its hands on a leaked copy of a World Bank report on the effect of biofuels on food prices.

… The report has made such a splash in the blogosphere because that conclusion is at odds with pretty much everything else published to date. The U.S. government figures biofuels add about 3% to food prices, a figure enthusiastically embraced by the renewable-fuels industry. Even the U.N. Food and Agriculture Organization figures biofuel production is just one contributing factor, and probably only accounts for about 30% of the price rise.

… Odder still, the study-as reported by the Guardian-is far gloomier than the World Bank’s official and none-too-friendly line toward biofuels.
(7 July 2008)

Bad juice II: biofuels maybe not quite so bad, World Bank says

Keith Johnson, Environmental Capital (blog), Wall Street Journal
… We just wrote about the Guardian story on a World Bank report allegedly blaming biofuels for 75% of the recent rise in fuel prices, and which was reportedly suppressed for political reasons. Alas, it ain’t so, Joe, the World Bank says.

Bob Davis of the WSJ spoke with Donald Mitchell, the author of the draft report-which wasn’t secret at all, but a working paper. And like all working papers, it doesn’t reflect the official position of the World Bank.

The report was meant to contribute to a World Bank position paper on rising food prices, which was released at the Bank’s spring meeting in mid-April.

The final April report didn’t include his specific calculation. But, Mr. Mitchell says, “I never saw that as political.” Instead, he says he believes the changes were made because of “editing.”

… The draft itself-which we saw-makes clear that the headline figure for biofuel’s role in the food crisis was a little overstated in the original article:

… Not that biofuels are off the hook entirely. The draft report did say: “Increased biofuel production has increased the demand for food crops and been the major cause of the increase in food prices.” That’s still a stronger indictment of biofuels than most other recent studies, draft or otherwise.
(X July 2008)

Rising food prices: policy options and World Bank response
World Bank
This note is being distributed for information as background to the discussion of recent market developments at the Development Committee meeting. It was prepared by PREM, ARD and DEC, drawing from work across the Bank.

1.1 Rising food prices: trends and determinants
The rising trend in international food prices continued, and even accelerated, in 2008.
U.S. wheat export prices rose from $375/ton in January to $440/ton in March, and Thai rice export prices increased from $365/ton to $562/ton. This came on top of a 181 percent increase in global wheat prices over the 36 months leading up to February 2008, and a 83 percent increase in overall global food prices over the same period (see Figure 1).

Increased bio-fuel production has contributed to the rise in food prices. Concerns over oil prices, energy security and climate change have prompted governments to take a more proactive stance towards encouraging production and use of bio-fuels.1 This has led to increased demand for bio-fuel raw materials, such as wheat, soy, maize and palm oil, and increased competition for cropland. Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for bio-fuels production in the U.S., while existing stocks were depleted by an increase in global consumption for other uses.2 Other developments, such as droughts in Australia and poor crops in the E.U. and Ukraine in 2006 and 2007, were largely offset by good crops and increased exports in other countries and would
not, on their own, have had a significant impact on prices. Only a relatively small share of the increase in food production prices (around 15%) is due directly to higher energy and fertilizer costs.3

The observed increase in food prices is not a temporary phenomenon, but likely to persist in the medium term. Food crop prices are expected to remain high in 2008 and 2009 and then begin to decline as supply and demand respond to high prices; however, they are likely to remain well above the 2004 levels through 2015 for most food crops (Table 1). Forecasts of other major organizations (FAO, OECD, and USDA) that regularly monitor and project commodity prices are broadly consistent with these projections. Predictions of high food price in the medium run are further strengthened when we factor in the impact of policies aimed at achieving energy security and reduced carbon dioxide emissions, which may present strong trade-offs with food security objectives (see Section 3 below).
(no date, April 2008?)
The World Bank position paper, for which the Mitchell working paper was a contribution. This paper cites Mitchell twice. -BA

Contributor LH writes:
This is the “secret” World Bank report on rising world food prices. It runs counter to what the IEA and others have been saying about the impact of biofuels. I’d archive it ASAP in case it does a Hirsch. There isn’t a date on the report.