The dark side of biofuels?

Rich counties should think twice about turning food crops into biofuels, says UN food expert Jean Ziegler. In fact, he proposes a five year moratorium on the process.

With two agriculture powerhouses, the U.S. and Brazil, among rich nations searching for alternative fuels and other methods to cut greenhouse gases, using crops for biofuels are creating dangerous unintended consequences: driving up food prices and sparking food shortages, which increasingly harm the world’s poor.

The story points out that Zeigler claims “it takes 232 kilograms of maize to produce 50 liters of ethanol. That maize could feed a child in Zambia or Mexico, where maize is the staple crop, for a year, he said.”

The five-year moratorium will allow technology to catch up and increase the possibility of making biofuels from agriculture waste.

Can I quote you?
With the characteristic subtleness you may find in your average university undergrad, this UN expert connected the dots and labeled the continued use of cereals and sugars to produce fuels an atrocity.

"So it's a crime against humanity — it's a crime against humanity to convert agricultural productive soil into soil ... which will be burned into biofuel," The Associated Press quoted Ziegler at a news conference. "What has to be stopped is ... the growing catastrophe of the massacre (by) hunger in the world."

(An atrocity, yes, but only for the reporters present at the news conference if they wouldn’t take that quote and run with it.)

The UN goal of reducing extreme poverty by half by 2015 will not be met because of growing world hunger due to increasing prices, he said. With more than 100,000 people dying everyday due to the consequences of malnutrition and another 800 million chronically undernourished, now is not the time to engage in wasteful and expensive biofuel projects.

He has a point. At least on prices. According to this website by Corn Products International, the price of corn, a major ingredient in the biofuel ethanol, has increased from $15 in 2002 to $23 in 2005 and $40 in 2007. Prices for wheat in the U.S., the world’s largest exporter, are also hitting all-time highs. According to USA Today:

Wheat for December delivery closed at $9.33 a bushel in Chicago, more than double the price from a year ago. Drought in Australia and poor crops in other nations helped drive U.S. and world supplies to the lowest levels in decades. U.S. wheat stocks are pegged at 362 million bushels in 2007-08, the tightest since 1973-74.

The reason for the high price? Domestic harvest is down from its 1981 peak because farmers have moved to other cereals that produce higher yields and the U.S. government’s ethanol-friendly tax breaks. (Don’t, don’t call them subsidies.)

"We've placed so much demand on … feed grain to turn into fuel, we can't play catch-up quite as fast globally," USA Today quotes Joe Victor, vice president of Allendale, a commodity research advisory firm.

The real culprit?
The search for biofuels is certainly driving up world prices. However, how much would falling cereal prices help those who already face malnutrition? In 1990, FAO counted 823 million malnourished people. One year ago, the organization estimated 820 million remain malnourished, still far off from the UN Millennium Development Goal of reducing the total 412 million by 2015.

According to FAO, three out of every four hungry people live in rural areas, where infrastructure is poor (good roads often provide better food security) and education rates remain low.

Thus, for the world’s undernourished, isn't the real issue the availability of food and not its price?

Reforming the $2 billion a year food aid budget has certainly become an issue for the Food and Agriculture Organization. Much of the problem, FAO asserts, rests with in-kind food aid, which means the aid is tied to special conditions. For example, countries receiving the aid must purchase the food from the donating country instead of purchasing food from regional or local stocks. Researchers argue that this in-kind aid, which makes up one-third of all food aid, unfairly hurts local merchants and farmers by introducing foreign food into the market, driving down prices. This has been a sticking point since 2001 in the Doha trade talks, says TIME.

Secondly, this food aid can be sold on the domestic market, which is called “monetization.” For example, American NGOs such as Catholic Relief Services (and until 2009 CARE) monetize U.S. rice (or corn or wheat) by shipping it to countries (using U.S.-based carriers) and selling this rice on its domestic market. The profits these organizations then make can put to funding development programs.

Main recommendations of the report include (I quote):

• Eliminate programme, or government-to-government food aid, which, by definition, is not specifically targeted to needy groups. Stop the “monetization” of aid, whereby one out of every four tonnes of food aid is sold in local markets of recipient countries to generate funds for development;
  
• Deliver aid in the form of cash or food coupons where possible, and use in-kind food aid only where food insecurity is due to a shortage of food rather than to such problems as access to food. Assistance aimed at improving markets – by repairing roads or improving rural infrastructure, for example – is liable to be more effective;
• Use local and regional food-aid procurement where appropriate, as this can be of great benefit to agricultural development in many low-income developing countries. Such purchases are not always desirable, however, as they can increase local prices.

The U.S. and Brazilian governments’ policies on biofuels do not constitute perfect solutions to climate and fuel concerns, but these problems are no where near the extent of worries envisioned here. However, world prices should be closely monitored going forward. In my mind, the inability to reform food aid from the prospective of donors and donor agencies will only do more to hurt those in need.