Carbon Credit Watch

Ethanol craze may starve the poor

C. Ford Runge and Benjamin Senauer
Foreign Affairs
April 4, 2007

Biofuels have tied oil and food prices together in ways that could profoundly upset the relationships between food producers, consumers and nations in the years ahead, with potentially devastating implications for bothglobal poverty and food security.

Filling the 25-gallon tank of an SUV with pure ethanol requires more than 450 pounds of corn — which contains enoughcalories to feed one person for a year. By putting pressure on global supplies of edible crops, the surge in ethanol production will translate into higher prices for bothprocessed and staple foods around the world.

The enormous volume of corn required by the ethanol industry is sending shock waves through the food system. In March, 2007, corn futures rose to the highest level in 10 years. Wheat and rice prices have also surged to decade highs, because even as those grains are increasingly being used as substitutes for corn, farmers are planting more acres with corn and fewer acres with other crops.

With the price of raw materials at such highs, the biofuel craze would place significant stress on other parts of the agricultural sector. In fact, it already does. In the United States, the growth of the biofuel industry has triggered increases not only in the prices of corn, oilseeds and other grains, but also in the prices of seemingly unrelated crops and products. The use of land to grow corn to feed the ethanol maw is reducing the acreage devoted to other crops. Food processors who use crops suchas peas and sweet corn have been forced to pay higher prices to keep their supplies secure — costs that will eventually be passed on to consumers. Rising feed prices are also hitting the livestock and poultry industries. According to Vernon Eidman, a professor emeritus of agribusiness management at the University of Minnesota, higher feed costs have caused returns to fall sharply, especially in the poultry and swine sectors. If returns continue to drop, production will decline, and the prices for chicken, turkey, pork, milk and eggs will rise. A number of Iowa’s pork producers could go out of business in the next few years as they are forced to compete with ethanol plants for corn supplies.

The International Food Policy Research Institute, in Washington, D.C., has produced sobering estimates of the potential global impact of the rising demand for biofuels. Given continued high oil prices, the rapid increase in global biofuel production will pushglobal corn prices up by 20% by 2010 and 41% by 2020. Wheat prices may rise 11% by 2010 and 30% by 2020.

The production of cassava-based ethanol may pose an especially grave threat to the food security of the world’s poor. Cassava, a tropical potato-like tuber also known as manioc, provides one-third of the caloric needs of the population in sub-Saharan Africa and is the primary staple for over 200 million of Africa’s poorest people. In many tropical countries, it is the food people turn to when they cannot afford anything else. It also serves as an important reserve when other crops fail because it can grow in poor soils and dry conditions and can be left in the ground to be harvested as needed.

Thanks to its high-starch content, cassava is also an excellent source of ethanol. As the technology for converting it to fuel improves, many countries — including China, Nigeria, and Thailand — are considering using more of the crop to that end. If peasant farmers in developing countries could become suppliers for the emerging industry, they would benefit from the increased income. But the history of industrial demand for agricultural crops in these countries suggests that large producers will be the main beneficiaries. The likely result of a boom in cassava-based ethanol production is that an increasing number of poor people will struggle even more to feed themselves.

Several studies by economists at the World Bank and elsewhere suggest that caloric consumption among the world’s poor declines by about half of 1% whenever the average prices of all major food staples increase by 1%. When one staple becomes more expensive, people try to replace it with a cheaper one, but if the prices of nearly all staples go up, they are left withno alternative.

The world’s poorest people already spend 50% to 80% of their total household income on food. For the many among them who are landless labourers or rural subsistence farmers, large increases in the prices of staple foods will mean malnutrition and hunger. Some of them will tumble over the edge of subsistence into outright starvation, and many more will die from a multitude of hunger-related diseases.

Excerpted from “How Biofuels Could Starve the Poor” by C. Ford Runge and Benjamin Senauer, in the May-June issue of Foreign Affairs.

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