Food vs. fuel

Food versus fuel is the dilemma regarding the risk of diverting farmland or crops for biofuels production to the detriment of the food supply. The biofuel and food price debate involves wide-ranging views, and is a long-standing, controversial one in the literature. There is disagreement about the significance of the issue, what is causing it, and what can or should be done to remedy the situation. This complexity and uncertainty is due to the large number of impacts and feedback loops that can positively or negatively affect the price system. Moreover, the relative strengths of these positive and negative impacts vary in the short and long terms, and involve delayed effects. The academic side of the debate is also blurred by the use of different economic models and competing forms of statistical analysis.Cultivation and fruit picking by hand is labour-intensive and needs around one person per hectare. In parts of rural India and Africa this provides much-needed jobs - about 200,000 people worldwide now find employment through jatropha. Moreover, villagers often find that they can grow other crops in the shade of the trees. Their communities will avoid importing expensive diesel and there will be some for export too.Produced responsibly they are a sustainable energy source that need not divert any land from growing food nor damage the environment; they can also help solve the problems of the waste generated by Western society; and they can create jobs for the poor where previously were none. Produced irresponsibly, they at best offer no climate benefit and, at worst, have detrimental social and environmental consequences. In other words, biofuels are pretty much like any other product. Food versus fuel is the dilemma regarding the risk of diverting farmland or crops for biofuels production to the detriment of the food supply. The biofuel and food price debate involves wide-ranging views, and is a long-standing, controversial one in the literature. There is disagreement about the significance of the issue, what is causing it, and what can or should be done to remedy the situation. This complexity and uncertainty is due to the large number of impacts and feedback loops that can positively or negatively affect the price system. Moreover, the relative strengths of these positive and negative impacts vary in the short and long terms, and involve delayed effects. The academic side of the debate is also blurred by the use of different economic models and competing forms of statistical analysis. Biofuel production has increased in recent years. Some commodities like maize (corn), sugar cane or vegetable oil can be used either as food, feed, or to make biofuels. For example, since 2006, a portion of land that was also formerly used to grow other crops in the United States is now used to grow corn for biofuels, and a larger share of corn is destined to ethanol production, reaching 25% in 2007. Second generation biofuels could potentially combine farming for food and fuel and moreover, electricity could be generated simultaneously, which could be beneficial for developing countries and rural areas in developed countries.With global demand for biofuels on the increase due to the oil price increases taking place since 2003 and the desire to reduce oil dependency as well as reduce GHG emissions from transportation, there is also fear of the potential destruction of habitats by being converted into farmland. Environmental groups have raised concerns about this trade-off for several years, but the debate reached a global scale due to the 2007–2008 world food price crisis. On the other hand, several studies do show that biofuel production can be significantly increased without increased acreage. Therefore, stating that the crisis in hand relies on the food scarcity. Biofuels are not a new phenomenon. Before the industrialisation, horses were the primary (and humans probably the secondary) source of power for transportation and physical work, requiring food. The growing of crops for horses (typically oat) for carrying out physical work is of course comparable to the growing of crops for biofuels for engines, albeit on a smaller scale, because production since then has increased. Brazil has been considered to have the world's first sustainable biofuels economy and its government claims Brazil's sugar cane based ethanol industry has not contributed to the 2008 food crisis. A World Bank policy research working paper released in July 2008 concluded that '...large increases in biofuels production in the United States and Europe are the main reason behind the steep rise in global food prices', and also stated that 'Brazil's sugar-based ethanol did not push food prices appreciably higher'. However, a 2010 study also by the World Bank concluded that their previous study may have overestimated the contribution of biofuel production, as 'the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors (the so-called 'financialisation of commodities') may have been partly responsible for the 2007/08 spike.' A 2008 independent study by OECD also found that the impact of biofuels on food prices are much smaller. From 1974 to 2005 real food prices (adjusted for inflation) dropped by 75%. Food commodity prices were relatively stable after reaching lows in 2000 and 2001. Therefore, recent rapid food price increases are considered extraordinary. A World Bank policy research working paper published in July 2008 found that the increase in food commodities prices was led by grains, with sharp price increases in 2005 despite record crops worldwide. From January 2005 until June 2008, maize prices almost tripled, wheat increased 127 percent, and rice rose 170 percent. The increase in grain prices was followed by increases in fats and oil prices in mid-2006. On the other hand, the study found that sugar cane production has increased rapidly, and it was large enough to keep sugar price increases small except for 2005 and early 2006. The paper concluded that biofuels produced from grains have raised food prices in combination with other related factors between 70 to 75 percent, but ethanol produced from sugar cane has not contributed significantly to the recent increase in food commodities prices. An economic assessment report published by the OECD in July 2008 found that '...the impact of current biofuel policies on world crop prices, largely through increased demand for cereals and vegetable oils, is significant but should not be overestimated. Current biofuel support measures alone are estimated to increase average wheat prices by about 5 percent, maize by around 7 percent and vegetable oil by about 19 percent over the next 10 years.' Corn is used to make ethanol and prices went up by a factor of three in less than 3 years (measured in US dollars). Reports in 2007 linked stories as diverse as food riots in Mexico due to rising prices of corn for tortillas, and reduced profits at Heineken the large international brewer, to the increasing use of corn (maize) grown in the US Midwest for ethanol production. (In the case of beer, the barley area was cut in order to increase corn production. Barley is not currently used to produce ethanol.) Wheat is up by almost a factor of 3 in 3 years, while soybeans are up by a factor of 2 in 2 years (both measured in US dollars). As corn is commonly used as feed for livestock, higher corn prices lead to higher prices in animal source foods. Vegetable oil is used to make biodiesel and has about doubled in price in the last couple years. The price is roughly tracking crude oil prices. The 2007–2008 world food price crisis is blamed partly on the increased demand for biofuels. During the same period rice prices went up by a factor of 3 even though rice is not directly used in biofuels. The USDA expects the 2008/2009 wheat season to be a record crop and 8% higher than the previous year. They also expect rice to have a record crop. Wheat prices have dropped from a high over $12/bushel in May 2008 to under $8/bushel in May. Rice has also dropped from its highs.