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Commodity-Food Issues- Biofuels, Doha and the Farm Bill

Commodity-Food Issues-Biofuels

The Associated Press reported on Friday that, “Wealthy nations have been unwilling to help poor countries with the cash, seeds and investment in infrastructure needed to boost grain supply worldwide, the head of the U.N.’s Food and Agricultural Organization said Friday.

“Global food production could double if more producers had access to seeds, fertilizer and loans, and if more crops were allowed to be sold at market prices, Jacques Diouf told the closing session of the FAO’s biennial Latin American meeting.

“‘If the necessary work is done, production will rise at a dizzying pace,’ said Diouf. But he added the immediate outlook isn’t optimistic.”

The AP article noted that, “Even if wealthy nations produced more grains, many other countries have tariffs and quotas designed to protect their own farmers, limiting imports and dissuading additional global production.

“He declined to comment about biofuels, which critics have blamed for rising world food costs. A June FAO meeting will take up the topic, he said.

“A U.N. report on Tuesday called biofuels a ‘crime against humanity,’ because they divert crops once grown for food into fuel.

“But Brazilian President Luiz Inacio Lula da Silva insisted this week that biofuels can be used to combat energy dependency without affecting food prices. Brazil is the world’s largest exporter of ethanol.”

Reuters writer Raymond Colitt reported recently that, “President Luiz Inacio Lula da Silva defended Brazil’s production of biofuels on Wednesday, rejecting criticism they are furthering a surge in global food prices and harming the environment.

“‘Don’t tell me, for the love of God, that food is expensive because of biodiesel. Food is expensive because the world wasn’t prepared to see millions of Chinese, Indians, Africans, Brazilians and Latin Americans eat,’ Lula told reporters before speaking at a conference of the U.N. Food and Agriculture Organization (FAO) in Brasilia.

“‘We want to discuss this not with passion but rationality and not from the European point of view,’ Lula said.

“Lula’s comments follow a week of criticism and protests in Europe and Brazil against fuels derived from food crops and their supposed environmental and social benefits.”

Meanwhile, Siobhan Hughes reported in Saturday’s Wall Street Journal that, “Energy Secretary Samuel Bodman said Friday that the growing emphasis on corn-based ethanol has contributed to higher food prices, and he said the nation should begin ‘moving away gradually’ from ethanol made from food such as corn.

“‘As we pursue diversity in our overall energy mix, we must also pursue diversity in our biofuels,’ Mr. Bodman said at a conference in Alexandria, Va. ‘This means moving away gradually from ethanol produced from foodstocks like corn.’

“Mr. Bodman’s remarks come as efforts to make motor-vehicle fuels from grains such as corn are coming under fire amid soaring world food prices and food riots in several countries. A U.N. report Tuesday called biofuels a ‘crime against humanity.’”

With respect to recent EU reaction regarding food prices, Alan Beattie reported on Friday at the Financial Times Online that, “Nicolas Sarkozy on Friday pledged more money and a new global partnership to bring down food prices – the latest ambitious plan to combat the worldwide crisis.

“The French president doubled to €60m ($94m, £47m) the country’s food aid to poor nations, saying France could not ‘remain indifferent’ to the unrest caused by hunger. But his stance was immediately criticised for hypocrisy and lack of substance by development campaigners.”

The FT article added that, “The European Commission recently announced what it called the ‘largest-ever food aid decision’ of €160m. But that was simply a single payment out of a food aid budget for 2008 of €223.3m that had already been set, which was only marginally higher than the €220.2m budget for 2007. A spokesman for Louis Michel, development commissioner, did not return calls on Friday.”

And with respect to biofuels policy, Ian Traynor reported on Saturday at The Guardian Online that, “The European commission is backing away from its insistence on imposing a compulsory 10% quota of biofuels in all petrol and diesel by 2020, a central plank of its programme to lead the world in combating climate change.

“Amid a worsening global food crisis exacerbated, say experts and critics, by the race to divert food or feed crops into biomass for the manufacture of vehicle fuel, and inundated by a flood of expert advice criticising the shift to renewable fuel, the commission appears to be getting cold feet about its biofuels target.”

The article stated that, “Under the proposals, to be turned into law within a year, biofuels are to supply a tenth of all road vehicle fuel by 2020 as part of the drive to slash greenhouse gas emissions by 20% by the same deadline.

“The 10% target is ‘binding’ under the proposed legislation. But pressed by its scientific advisers, UN authorities, leaders in Europe, non-government organisations and environmental lobbies, the commission is engaged in a rethink.

“‘The target is now secondary,’ said a commission official, adding that high standards of ‘sustainability’ being drafted for biofuels sourcing and manufacture would make it impossible for the target to be met.”

Also on the EU perspective with respect to biofuels, Jack Thurston in an update posted on Friday at The CAP Health Check Blog indicated that, “[E]U Trade Commissioner today signaled that Europe needs to reconsider its target of achieving a 10 per cent biofuels mix in transport fuel by 2020. Speaking on BBC Radio 4’s Today Programme this morning, Mandelson said: ‘We’ve got to develop our biofuels policy intelligently… I think we need to carefully reflect on the approach that we’re taking.’

“He went on to raise concerns about the effects of biofuel cultivation on the environment and the effects on the price of food, and came close to signaling that the EU might reconsider it’s prior commitment to substantial increases in European biofuel production and imports from the Global South: ‘I think these matters are under careful review all the time… We’ve got to focus very carefully on how our policies unfold.’

“Listen to the interview in full here (Real player required).”

And, The Washington Post editorial board opined on Sunday that, “The world’s most dangerous conflicts stem from religion and ideology — tragic proof that man does not live by bread alone. But when bread is hard to get, that, too, causes unrest. And lately, it has been very expensive indeed: The World Bank estimates that global food prices have risen 83 percent in the last three years. Hence, food riots in Haiti, Egypt and Ethiopia and the use of troops in Pakistan and Thailand to protect crops and storage centers. Many countries are banning or limiting food exports. World Bank President Robert B. Zoellick says that 33 countries are at risk of food-related upheaval. Famine may revisit North Korea, parts of Africa or, disastrously for U.S. foreign policy, Afghanistan.

“To many, the villain is biofuels. U.S. and European ethanol programs, intended as an antidote to climate change and an alternative to OPEC oil, stand accused of snatching food from the world’s hungry. According to India’s finance minister, ethanol is ‘a crime against humanity.’ And it is part of the problem. The more corn becomes ethanol, the less will be available as food for people and livestock. In the U.S. farm belt, heavy ethanol subsidies, such as a tax break of 51 cents a gallon, encourage the shift. These subsidies were already questionable, in economic terms, before the commodity crunch. That they might contribute to hardship for the world’s poor is another argument for reducing them.

“But ethanol’s impact should not be overstated. The International Food Policy Research Institute [IFPRI], which is critical of ethanol, pins about 25 to 33 percent of the recent price rise on biofuels; the U.N. Food and Agriculture Organization guesses about 10 to 15 percent. Most of the crisis is rooted in three other factors: drought in grain-exporting Australia; the surging price of crude oil, which raises food prices through the costs of shipping and petrochemical fertilizer; and booming demand for food in China, India and other newly prosperous areas of the developing world. These areas consume not only more staples such as rice and wheat but also more meat from animals fed on grain. This trend is here to stay — and, unlike Australian drought or oil inflation, no one should want it to go away. Lifting hundreds of millions of Asians out of poverty is a historic achievement.”

The Post item added that, “Today’s crisis could be tomorrow’s opportunity. If the era of cheap food is over, higher prices might stimulate local agricultural production in Africa and other places that now depend on imports. This will be likelier if the United States and Europe finally dismantle the wasteful crop subsidies and trade barriers that fatten their farmers’ bank accounts — but distort international markets at the expense of the poor.”

For more background on biofuels and food costs, listen to this audio clip (MP3-6:19) from Wednesday’s Diane Rehm public affairs radio program, (entire show available here) – the clip features Simon Johnson of the IMF, Bob Young of American Farm Bureau and David Orden of IFPRI.


Reuters writer Jonathan Lynn reported on Friday that, “Negotiators aiming for a global trade deal failed to resolve disagreements on a key technical issue in farm talks on Friday, calling into question the timing of a proposed ministerial meeting to clinch the accord.”

And an AFP article from Friday noted that, “This year represents the last chance to sort out a global trade liberalization deal and it would be ‘verging on the criminal’ to fail, the European Union’s trade commissioner said Friday.”

Farm Bill

A Senate Agriculture Committee press release from Friday stated that, “Senate farm bill conferees led by Senator Tom Harkin (D-IA), the Chairmen of the Senate Committee on Agriculture, Nutrition and Forestry and the Senate-House conference committee on the farm bill, today presented to House conferees a farm bill proposal of $10 billion in additional spending for the farm bill, including funds for disaster assistance. The framework maintains the investments of the Senate-passed bill with strong farm income protection as well as investments in nutrition, conservation and renewable energy and a program to provide disaster assistance to farmers.

“The proposal is deficit neutral and includes tax package that has been a priority for Senate conferees. A formal conference will reconvene next week to further discuss the proposal.

Dow Jones writer Bill Tomson reported on Friday that, “A panel of U.S. lawmakers met again Friday to negotiate a unified House-Senate farm bill, but adjourned after only about two hours because no resolution could be reached on how to fund billions of dollars of proposed over-budget spending.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., told fellow panel members he now wished he had never agreed to go over the budget on the farm bill because it has made completing the legislation too complicated.

“The House-Senate conference committee is scheduled to reconvene Tuesday.”

Gary Lookadoo, writing at The Benton County Daily Record Online (AR) on Saturday, quoted Sen. Blanche Lincoln (D-Ark.) as saying, “We’re making some progress, but more must be done. The real squabbling has been over the tax-relief package that we’ve provided in ours.”

The article indicated that Sen. Lincoln also stated that, “We have certainly listened to the House, and the Senate conferees have come together. We’re working hard to try to figure out what we can do that will be amicable for the House. The problem is, we’ve got to get the House to engage.”

Keith Good