Biofuels Not to Blame for 2007-2008 Food Crisis

Strategic Insights -

A report commissioned by the UK Government has concluded that biofuels played a relatively small role in the 2008 food crisis, while oil prices and speculative activities had a significant impact. The report found that countries imposing export restrictions on grains exacerbated the situation, and that oil prices accounted for over half of operating costs of crop farms. Critics of ethanol had previously made it an easy scapegoat for the industry's expansion during the crisis.

Key Takeaways:

  • The UK report found that biofuels had a relatively small contribution to the 2008 spike in agricultural commodity prices, at around 5-10%.
  • Oil prices, which reached record levels in 2008, played a significant role in driving agricultural costs up, accounting for over half of operating costs of crop farms.
  • Speculative activities, triggered by rapidly declining global wheat stocks due to drought, caused commodity prices to spike.
  • Countries imposing export restrictions on grains, such as the United States, China, and India, exacerbated the situation, making the food crisis a truly global event.
  • The report criticized commentators, including the UN, World Bank, and International Monetary Fund, for making unrealistic assumptions about the impact of biofuels.
  • The report concluded that vast amounts of underutilized agricultural reserves around the world, including 10 million hectares of land in Russia, Ukraine, and Kazakhstan, can be brought into production to meet the demand for biofuels.
  • The Global Renewable Fuels Alliance (GRFA) welcomed the report, stating that it "puts to rest once and for all the notion that biofuels contributed to the global food crisis in 2008."

Statistics:

  • 5-10%: The estimated contribution of biofuels to the 2008 spike in agricultural commodity prices.
  • 50%: The share of oil prices in generating operating costs of crop farms.
  • 10 million hectares: The estimated amount of underutilized land in Russia, Ukraine, and Kazakhstan that can be brought into production.
  • 65%: The percentage of the world's renewable fuels production represented by the Global Renewable Fuels Alliance (GRFA).
  • 30 countries: The number of countries represented by the GRFA.

Sources:

  • "The role of demand for biofuel in the agricultural commodity price spikes of 2007/08" report (Source: UK Government)
  • Global Renewable Fuels Alliance (Source: Marketwire)
  • "Fuel and fertiliser account for over half of operating costs of crop farms" (Source: UK report)
  • "There are 10 million hectares of land currently idle in Russia, Ukraine and Kazakhstan" (Source: UK report)