Monday, February 22, 2010

Lit in review: 1 of 7 on Food Prices

(1) Senauer (2008), "Food Market Effects of a Global Resource Shift Toward Bioenergy," Nov, 1226-32, ungated.
The article is mostly a summary of what happened during the 05-08 food price increases. Little new information, but some useful numbers and a good summary of the debate on how biofuels affect food prices. Summary and facts below the fold.

Biofuels change food markets in part because they are a new source of demand for the land and other inputs, reducing the supply of food and feed. Secondly, biofuels directly tie the price of food and the price of energy, which before were less well-correlated (tractors and fertilizers need fuel). Thirdly, so-called second generation biofuels made from "waste" products could have important agroenvironmental effects because those waste products would normally be a source of organic fertilizer.

The hope that biofuels produced by jatropha trees on marginal lands in Africa have so far not been a major source of income for the poor. In fact, "thousands of small farmers growing food crops in Tanzania on communal lands were evicted for sugarcane and jatropha plantations for biofuels" (p. 1227).

He claims that previous price spikes were supply driven, and therefore shortterm, while the current is demand driven, and hence longterm. Increased incomes leading to dietary change has been gradual. The Economist (2007) and Lester Brown (2008) put the blame on biofuels and US subsidies since US ethanol production doubled 2004-2007. IFPRI says 1/4-1/3 of the price increase from biofuels (Martin 2008). Bloomberg News (2008) says speculative bubble. OECD-FAO (2007) thinks prices will decline, but remain high. Depending on future biofuel growth, prices could increase another 25-70% (corn), 10-25% (sugar), and <10-20% (wheat) - Rosegrant et al. 2008. Eidman 2007 predicts 35% of US corn production for biofuels by 2010. The US subsidy means that corn is worth $1.43 more per bushel for fuel than for food.

Fargione et al (2008) show that biofuels release carbon sequestred by agriculture, increasing greenhouse gas emissions by 17 to 420 times more what is potentially saved by using renewable energy. Land use changes doubles total emissions for 30 years and increases GHG for 167 years (Searchinger et al. 2008).

Some useful facts and numbers:
Brazilian sugarcane produces 674 gallons of ethanol per acre while US corn produces 423 gallons.

Food price spikes. Between 2005 and Jan 2008:
wheat prices up 143%
corn up 105%
rice up 154%
sugar up 118%
oilseeds up 197%
crude oil 71%

In China between Feb 07 and 08:
pork up 63%
vegetables 46%
edible oils 41%

one-third of the average household budget is spent on food in China; the poor spend over half.

Countries with export bans or high export taxes: Russia (40% on wheat), Argentina (wheat), Vietnam (rice).

Grain harvest was a record 2.3 billion

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