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Biofuel Critics Cry Foul on Global Food Crisis

posted on April 18, 2008


Hello, I'm Mark Pearson. U.S. home building skidded to a 17-year low last month while consumer prices rose slightly less than expected, giving policy-makers impetus to cut interest rates further.

According to the Commerce Department, housing starts dropped nearly 12 percent in March to an annual rate of 947,000 units. That's its slowest pace since March 1991.

Retail Sales, meanwhile, edged up slightly in March after a 0.4 percent decline in February. However, much of the gain reflects soaring gasoline prices rather than any real strength in demand.

The Labor Department announced its Consumer Price Index rose 0.3 percent last month, paced by sharply higher energy prices and a modest rise in domestic food prices.

Oversees it's a different story though, particularly in poorer third world countries where food prices have risen to record levels. And while the Bush Administration points to record energy prices as the real underlying cause of the spike, critics now are blaming ethanol.

Biofuel Critics Cry Foul on Global Food Crisis Biofuels are under increased scrutiny amid a global strain on food supplies. In recent weeks, cover stories on Time Magazine and editorials from the New York Times have blasted ethanol as a "regrettable evil" at the root of skyrocketing grain prices.

Robert Zoellick, President, World Bank: "In just two months, rice prices have skyrocketed to near historic levels. Or take wheat where over the past year the price has rose over 120 percent."

World Bank President Robert Zoellick warned this week that global food prices have jumped 83% in the past three years, largely on the back of commodity prices. Zoellick, a former U.S. trade representative under President Bush, claimed global food price inflation was especially troubling for third-world countries where as much as two-thirds of one's income must pay for food. In contrast, Americans spend on average 7-percent of total income on food.

But the global picture is more complex than merely biofuels and has a stronger relationship with the principle of supply and demand. Massive drought in Australia has sapped wheat acreage while the burgeoning countries of India and China have ratcheted-up consumption of meat and grain imports.

The Bush Administration partially answered the World Bank call for an immediate influx of $500 million from "rich" nations. The White House issued a $200 million appropriation to the World Bank and vehemently defended America's biofuel mandate.

Domestically, overall food prices have climbed 4 percent since 2007 but consumers are feeling the pinch on some essential items. Milk prices are up 13 percent from this time last year…poultry prices are up 7 percent…and eggs have climbed 25 percent since 2007.

USDA economists insist commodity prices play a part but record-high transportation costs place a much larger strain on consumers. And that strain is expected to stretch well into 2008.

Joseph Glauber, USDA Chief Economist: "This past year 2007, we saw inflation - CPI for food around 4 percent which is certainly higher than the 2.5 percent we've seen for a long time. This year we're seeing slightly higher numbers around 3.5 to 4 percent."

Nevertheless, worldwide pressure against ethanol is mounting and a United Nations report released this week piled on further criticism, calling biofuels impact on global grain prices a "crime against humanity".


Tags: biofuels ethanol food hunger news renewable fuels