Blog: Dean BestEU stance fires biofuels debate

Dean Best | 30 July 2007

The production and use of biofuels has become popular with lawmakers on both sides of the Atlantic – but just what will be the impact on food prices?

The debate over the extent to which the increased production of biofuels will affect the price of food on supermarket shelves has raged in the US in recent months.

President Bush has set ambitious targets for increasing the use of biofuels – mainly ethanol – in the fuel used in cars, in a bid ostensibly to cut greenhouse gas emissions. Some observers, however, believe Bush has been keen to push the use of biofuels to reduce US dependence on imported oil.

Whatever the motivation in Washington, there is growing concern in that, with the use of biofuels rising, the price of food could start to rise. Corn is the raw material used in the production of ethanol and, with farmers attracted into the sector with the lure of subsidies, there is concern that less corn will be available for food – and consequently the cost of corn for food producers will rise.

Top executives at Nestlé, Unilever and Kellogg have warned of an increase in food prices as biofuel production gathers pace, while in Mexico, there have been street protests over the rising cost of tortillas.

In Europe last week, the European Commission took a contrary stance. The increased production of biofuel crops will not lead to higher food prices, the Commission claimed. It said, for instance, that the consumption of meat is set to decline among a stagnating and ageing European population and therefore reduce the demand for cereals to feed livestock, in turn easing the pressure on corn stocks.

There are factors to consider when considering the Commission’s stance; sure, population numbers in Western Europe may be stagnating but what about in the East? Demographic trends in countries like Romania and Bulgaria should be central to the EU’s thinking on the biofuel issue now that the union numbers some 27 states.

The Commission is also drafting legislation that would force member states to increase biofuel production and consumption. Publishing a report that cools fears of a link between biofuel production and higher food prices is undoubtedly in Brussels’ interest as it tries to push the law through.

Biofuels is an issue that is focusing minds in the boardrooms of food companies and in the committee rooms of legislatures around the globe right now. The question is: how much will the laudable, “green” concerns of promoting biofuel production hit the bottom line and, in turn, consumers in the pocket?


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