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Biofuels - July 11

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Guardian 'publishes the biofuels report they didn't want you to read'

Aditya Chakrabortty, Guardian
The implication of the report is that crop-derived fuels have been the ultimate cause of food riots, starvation and high prices around the world
Seventeen pages of graphs, footnotes and economic modelling; oh, and another couple of pages of bibliography. Hardly the stuff to get the pulse racing, you might think.

But in the week since the Guardian exclusively revealed the contents of the World Bank's draft internal report on the link between biofuels and food prices, its findings have been reported in newspapers, blog and broadcast media from Durban to Delhi.

What's caused all the fuss? Well, the World Bank report argues that the drive for biofuels by American and European governments has pushed up food prices by 75%. That is in stark contrast with the White House's claims that using crops for fuel, rather than food, has only pushed prices up by 2-3%.

All the other factors discussed - rising demand for food from China and India, back-to-back droughts in Australia - are, the report says, marginal:

Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate.

The implication of this report, then, is that crop-derived fuels have been the ultimate cause of food riots, starvation and high prices around the world. And it is not an anti-biofuels campaigner who arrived at that conclusion, but an internationally respected World Bank economist with three decades' experience in tracking commodity markets.
(4 July 2008)
The controversial paper from World Bank analyst Donald Mitchell: A note on rising food prices (PDF)
Guardian's original article: Secret report: biofuel caused food crisis

A note on rising food prices
(19-page PDF)
Donald Mitchell, World Bank via Guardian
The World Bank's index of food prices increased 140 percent from January 2002 to February 2008. This increase was caused by a confluence of factors but the most important was the large increase in biofuels production in the U.S. and EU. Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate. The export bans and speculative activity would not have occurred because they were responses to rising prices. Higher energy and fertilizer prices would have still increased crop production costs by about 15 percent in the U.S. and lesser amounts in other countries with less intensive production practices. The back-to-back droughts in Australia would not have had a large impacet because they only reduced global grain exports by 4 percent and other exporters would normally have been able to offset this loss. The decline of the dollar has contributed about 20 percentage points to the rise in food prices. Thus, the combination of higher energy prices and related increases in fertilizer prices, and dollar weakness caused food prices to rise by about 35 percent from January 2002 until February 2008 and the remaining three-quarters of the 140 percent actual increase was due to biofuels and the related consequences of low grain stocks, large land use shifts, speculative activity, and export bias.
(8 April 2008)
Document is marked: "Draft, not for citation or circulation."

A footnote says "The views in this paper are those of the author and should not be attributed to the World Bank or its Executive Directors."

There seems to be a math error in the Summary. Non-biofuel factors are estimated to have caused 35 percent of the rise. The next sentence attributes the remaining three-quarters (75 percent) of the rise to biofuels.

UPDATE (July 14). My mistake. The math is right, though the explanation in the text is confusing. Mitchell says there has been a increase in food prices of 140% Of this 140%, he attributes 35% of the 140% to energy, fertilizers, etc. The other 105% of the 140% increase he attributes to biofuels. The figure 105% represents 3/4 (75%) of the total 140% increase.


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.
(7 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.

What do you think? Leave a comment below.

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