Surge in biofuel production pushes up food prices
By Javier Blas and Jenny Wiggins in London
Published: July 16 2007 03:00 | Last updated: July 16 2007 03:00
A surge in the production of biofuels derived from corn, wheat and soyabeans is helping to push up food prices so sharply that the World Food Programme, the United Nations agency in charge of fighting famine, is finding it difficult to feed as many hungry people as it has in the past.
Josette Sheeran, WFP's executive director, said in an interview with the Financial Times that rising food prices were "already having an impact on WFP operations", and added: "There is a realisation we are facing a new level of challenge."
Food commodity prices are surging because of a number of factors including rising demand from China and bad weather, but the potential consequences of the rising demand for biofuels have caught the attention of those in the business of feeding the world.
Mark Spelman, head of Accenture's global energy practice, said the biofuel industry was at risk of creating a public backlash similar to wind-power generation, as food inflation continues.
"Wind power was a very popular renewable source of energy until a wind farm was planned in someone's backyard," he said.
Still, Paul O'Brien, overseas director for the humanitarian organisation Concern Worldwide, said higher food prices could benefit farmers in emerging markets if food aid programmes found it cheaper to spend cash donations in the countries they distribute food in, rather than in the US and Europe.
"What we would encourage is [food aid agencies] to look more locally . . . and for donors to give money to the WFP," Mr O'Brien said.
Some 77 per cent of the WFP's food purchases are made in developing countries.
Last year it spent 0m (€334m, £226m) in such countries, making the largest cash purchases in Uganda, Ethiopia and Pakistan. The United Nations organisation feeds some 90m people annually.
Ms Sheeran also said that her organisation and others were trying to make it easier for poorer farmers to benefit from rising demand for food, either by helping African farmers become more efficient and tapping new markets or by helping small farmers in Latin America benefit from the rising demand for biofuels.
"In a world of growing population, the African farmer will be needed," she said.
The rise in food prices has also underlined the difficulties the WFP and other food aid programmes face when determining which type of donations they receive are more effective - cash or commodities.
About half of the donations the WFP receives are now made in cash, the rest in commodities. When the organisation started, it benefited mainly from surplus food donated by wealthy nations including the US. It now receives cash from many countries, and often, as is the case with the US, must spend that money on products grown in the donor country.
Marc Cohen, research fellow at the US's International Food Policy Research Institute, said that the rise in food prices had reawakened questions over the best way to distribute food aid.
Copyright The Financial Times Limited 2007
