Friday, June 06, 2008

No bread? Let them drive to the supermarket instead

Yesterday was a black day. The Rome emergency summit on food prices ended with a watered-down statement, some peanuts thrown at the global poor, and nothing that could actually stop the price escalation. More specifically, nothing on stopping, limiting, or even re-considering grain-biofuels.

It is hard, if not impossible, to assess the exact impact of biofuels on the recent doubling of wheat and rice prices. This is how I see it, from the reading I've done: biofuel demand pushed maize prices, and this had a knock-on effect on other agricultural commodities, something like a balling game. Hysteria builds up, governments become worried about feeding their citizens (otherwise they will overthrow them) so they block exports of grains, and this drives prices even higher.

True, other factors play as well: more people in Asia eat meat, and meat eats grains. Climate changes have caused a 10-year drought in places like Morocco and Australia; and the rising price of oil makes everything more expensive. And then there's the speculators: they smell the blood and circle above the commodity market, making a profit from bread-queues and empty stomachs. Yes, whatever we do, we have a problem, and it is not going away. But one thing is clear: the answer is not to burn the food we've got in fuel tanks.

How did this happen? Firstly because of US and EU subsidies and mandates, which saw 100 million tonnes of corn diverted into fuel last year. But with oil at US$ 138 a barrel, it may well be that biofuel subsidies are not necessary. That is, it might be profitable anyway to turn corn (or wheat, or rice, or any other grain) into fuel. It needs to be stopped now, and taking the subsidies away will not do. We need a moratorium on grain-based biofuel. We can't allow the world's car drivers to compete with the world's poor and hungry. This is the biggest food crisis we've ever seen, and it's only beginning.

No comments: