Ecofys report: Biofuels play minor role in local food prices


Sugarcane
Sugarcane

There is persistent concern that biofuels compete with food production, drive up food prices and price volatility and so cause hunger.
Many people, including very dignified authorities, accept this simple causality chain. The reality is far more complex.

In a report now published by ePURE, Ecofys explored the background and details of the 2006-2008 food crisis and the 2011 commodity price spike. The report discusses both direct causes and systemic factors: to what extent global prices transmit to local prices across regions, the specific role of biofuels in the commodity price, and its role in stimulating necessary agricultural investments.

The study concludes that the role of biofuels remains very small. Systemic factors, like reduced reserves, food waste, speculation, transportation issues, storage costs and problems, and hoarding play a much larger role in local food prices. These factors can be solved and should get much more attention.

According to the report, the oil price is the major driver of agricultural commodity prices. It impacts the cost of food throughout all phases of food distribution, storage and processing.
The use of biofuels reduces the demand for crude oil, or slows down the demand increase. Via the price elasticity, this would mean that the price of crude oil decreases, or that price increases are limited.

In 2007, the European Commission assumed that if 7% of the EU transport fuel market
would consist of biofuels, this would lower the global price of oil by around 1.5%. This would have a concomitant downward impact on agricultural commodity and food prices.

The EU has more than enough land to produce food. Continuously agricultural land is taken out of
production, for economic reasons, and by set-aside obligations. Still, the food and feed commodity production increases.
In 2009, the European Commission reported that “the main effect of EU biofuel consumption has been the reuse of recently abandoned agricultural land, or a reduced rate of land abandonment”.

Earlier, the Commission estimated that by 2020, for every million hectares of EU land used for biofuels feedstock production 620,000 hectares would come from idle or abandoned cropland. This would help to prevent land abandonment and loss of valuable open habitats.

The FAO forecasts that the long term process of cropland abandonment is set to continue for the coming decades, so that between 2009 to 2050 in developed regions, cropland use is expected to decrease by a further 50 million hectares.

Read the report
http://www.ecofys.com/files/files/ecofys-2013-biofuels-and-food-security.pdf

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