Tags: biofuel | mandates | food | prices

US Biofuel Mandates Seen as Root of Higher Food Prices, Global Hunger

Friday, 12 Oct 2012 07:51 AM

By John Morgan

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A new report shows that U.S. biofuel mandates are affecting world hunger levels. The mandates, as well as the U.S. drought, have sparked rising corn prices that are costing developing nations billions of dollars.

The report from ActionAid USA, an international anti-poverty agency working in 50 countries, concludes the price hikes are having drastic effects on world hunger and, in some instances, have fueled political instability.

“Increased food prices triggered the Arab Spring, and U.S. ethanol production contributed to those food spikes,” Timothy Wise, a research director at Tufts University and the study’s lead author, according to Inter Press Service.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

Approximately 40 percent of all U.S.-grown corn is now being used to fulfill ethanol mandates, up from only 5 percent in 2000. From 2005-06 until 2010-11, the expansion in corn used for U.S. ethanol cost net corn-importing countries $11.6 billion in higher corn prices, with $6.6 billion being borne by developing countries.

For 2012, even more pressure on corn prices is being exacerbated by the worst drought in nearly half a century, but biofuel mandates required under the Renewable Fuel Standard have not been relaxed.

“Our ethanol policy cannot be based on a prayer for good weather,” said Kristen Sundell, a policy analyst at ActionAid.

The study listed the example of Uganda, which has seen consumer corn prices jump even though the nation exports corn.

“To the extent international prices transmit to Ugandan markets, U.S. ethanol production is contributing quite directly to food insecurity among the urban poor, even in a net corn exporting country,” the study said.

ActionAid said the U.S. meat industry is also a victim of higher feed prices. It said American farmers have been forced to slaughter cattle and poultry they cannot afford to feed, and predicted that prices for eggs, dairy products and meat will be affected into 2013 and perhaps beyond.

Similarly, last month The Guardian reported on a recent Oxfam study concluding that European biofuel policies are also contributing to high food prices and world hunger.

Reuters reported the governors of seven states have asked the Obama administration to support a one-year waiver of the ethanol mandate on grounds that higher feed costs are bankrupting farmers. The Environmental Protection Agency is expected to act on the request next month.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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