Sunday, April 13, 2008

Converting Food Into Fuel

IMF Head Warns About Food Prices

Associated Press

The head of the International Monetary Fund warned Saturday that if food prices remain high, there will be dire consequences for people in many developing countries, especially in Africa.

Dominique Strauss-Kahn added that the problem could also create trade imbalances that would affect major advanced economies, "so it is not only a humanitarian question."

With governments in Haiti, Egypt and the Philippines among others already facing social unrest because of rising food prices and shortages, Strauss-Kahn said that if the price spike continues, "Thousands, hundreds of thousands of people will be starving. Children will be suffering from malnutrition, with consequences for all their lives."

Earlier Saturday, Germany's development minister, who is attending the World Bank's meeting Sunday, called for greater regulation of the global biofuels market to prevent its expansion from driving up food prices.

"It is unacceptable for the export of agrofuels to pose a threat to the supply situation of the very people already living in poverty," Heidemarie Wieczorek-Zeul said in a statement.

She said the world needs new rules that balance goals, including climate change mitigation, food security and social development.

The development group Oxfam, a frequent IMF critic, said rich countries are largely responsible for the food crisis because they have been cutting aid to developing countries and encouraging biofuel production, which the IMF says is responsible for almost half the increase in the demand for food crops.

"Rich countries' demand for biofuel is driving up food prices and is a big part of the problem," said Elizabeth Stuart, an Oxfam policy adviser. "Meanwhile, by cutting aid levels, they are doing precious little to be part of the solution."

Strauss-Kahn spoke at a news conference after a daylong meeting of the steering committee of the 185-nation IMF, which dealt with the unfolding global financial crisis that has affected economies around the world.

In its communique, the committee noted "that a number of developing countries, especially low income countries, face a sharp rise in food and energy prices, which have a particularly strong impact on the poorest segments of the population."

The committee urged the IMF to work closely with its sister institution, the World Bank, and other organizations to provide developing countries with financial support and policy advice.

The Washington-based IMF and World Bank were established 64 years ago to, respectively, regulate the global economy and provide aid to poor countries to reduce poverty.

Why Ethanol Production Will Drive World Food Prices Even Higher in 2008

Environment News Service:

We are witnessing the beginning of one of the great tragedies of history. The United States, in a misguided effort to reduce its oil insecurity by converting grain into fuel for cars, is generating global food insecurity on a scale never seen before.

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The World Bank reports that for each 1 percent rise in food prices, caloric intake among the poor drops 0.5 percent. Millions of those living on the lower rungs of the global economic ladder, people who are barely hanging on, will lose their grip and begin to fall off.

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There is much to be concerned about on the food front. We enter this new crop year with the lowest grain stocks on record, the highest grain prices ever, the prospect of a smaller U.S. grain harvest as several million acres of land that shifted from soybeans to corn last year go back to soybeans, the need to feed an additional 70 million people, and U.S. distillers wanting 33 million more tons of grain to supply the new ethanol distilleries coming online this year. Corn futures prices for December 2008 delivery are higher than those for March, suggesting that market analysts see even tighter supplies after the next harvest.

Whereas previous dramatic rises in world grain prices were weather-induced, this one is policy-induced and can be dealt with by policy adjustments. The crop fuels program that currently satisfies scarcely 3 percent of U.S. gasoline needs is simply not worth the human suffering and political chaos it is causing. If the entire U.S. grain harvest were converted into ethanol, it would satisfy scarcely 18 percent of our automotive fuel needs.

The irony is that U.S. taxpayers, by subsidizing the conversion of grain into ethanol, are in effect financing a rise in their own food prices. It is time to end the subsidy for converting food into fuel and to do it quickly before the deteriorating world food situation spirals out of control.

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