The Global Food Crisis And Biofuel Policies

Dr. Yassir M. Alobaid

Global food prices escalated in 2007 and the second half of 2008, thus forming a critical global shock in food prices, and that crisis became part of the triple crisis (food – biofuels – financial). The global food price index of the Food and Agriculture Organization of the Organization (FAO) rose to nearly 50% Approximately, wheat prices increased around the world from March 2007 to March 2008 by an average of 130%. As for the consumer price index, the prices of rice increased and its prices doubled more than almost three times. Due to the weakness of the global economy and the beginning of the global financial crisis, the prices of food, energy, and basic commodities fell In late 2008, however, the second food price crisis hit the world in 2010, and by February of the year 2011, the Food Price Index of the Food and Agriculture Organization (FAO) recorded a record high, and within 12 months the world prices of corn and wheat doubled.

Grain and stocks in developing countries were higher in 2010 and 2011 than during the global crisis period of 2007 and 2008. Wrapping up the previous crisis, it has remained present and excessive, and in addition to the rise in food prices, the problem of food price fluctuations has also appeared since 2007 in the form of a sharp decline and rise, and to this day after the Corona pandemic, according to which global food prices rose to reach 40% during the pandemic period. From the supply and demand sides of the food crisis, the demand factors include the increase in food demand, the change in the diet and consumption in countries with a huge population density such as China and India, the demand for biofuels from crops, the purchase of food out of panic and speculative activities in the markets, in addition to the supply side factors represented by In weak production, in addition to the weakness of global food markets, the decline in growth rates in the productivity of food crops, the decrease in stocks, climate shocks, the effects of climate change, and opportunities for a ban on exports for major exporters.

The rapid population growth and income growth in several Asian countries and some of the Gulf countries have led to increases in food prices in recent years. Because of these factors, food consumption patterns have changed globally towards meat and dairy products, especially in emerging markets, where 30% of cereals The world is now going to feed the animals. Another source of increased demand is the demand for biofuels from land and crops, especially in the United States, which accounts for 28 percent of global exports of grain. This increased demand comes in response to the rise in oil prices in recent years, and both the United States and the European Union deliberately provide support Assigning farmers to produce biofuels so that they switch to cultivating biofuel crops. In the United States, for example, a large part of the corn crop is currently being converted to biofuel use, with particularly rapid growth after 2007.

The total corn production in the United States has increased from about 200 million from 1995 to 2010 to nearly 350 million tons. At the same time, the percentage of total production used for ethanol increased from less than 5% to just over 35%. Since the United States accounts for two-thirds of the world’s corn exports, diverting corn to meet its vital energy needs had a significant impact on the world’s corn prices, especially during the outbreak of the 2008 global financial crisis. Brazil is pursuing a similar policy, devoting increasing amounts of soybean and sugarcane production to biofuels, while European biofuel production uses about 7% of the world’s supplies of vegetable oils. In the United States, increased production of corn for biofuels replaced soybeans, and in Europe increased production of oilseeds, which replaced wheat, which in both cases contributed to the increase in the prices of the crops that replaced them.

It is generally agreed that biofuel policies will raise the future prices of wheat, corn and other grains, oilseeds, soybeans, sugar cane, and other crops. The demand for biofuels also contributed to the depletion of grain stocks, and various estimates go to the impact of the demand for biofuels on food prices globally and reached several results, with Lipski estimating, for example, that 70% of the increase in corn prices and 40% of the increase in soybean prices.

Attributable to the effect of biofuels While the International Monetary Fund (IMF) estimated that the conversion of food crops to biofuel production was responsible for nearly half of the increase in the prices of major food crops between 2006 and 2007. The Organization for Economic Cooperation and Development (OECD) clarified in 2008 that subsidies and costs for biofuel cultivation and subsidies do not reduce the food supply, but rather raise the value of food prices only, but because their stagnation leads to price fluctuations and exacerbation of international food prices and an increase in the link between oil prices and food prices.

In addition, a discrepancy in biofuel production pushes up food prices, but it does nothing to reduce energy prices so that the cost of agricultural production decreases. Geopolitics plays an important role in biofuel policy around the world, driven by the desire to reduce the dependence of major countries on oil imports from the Gulf states. . In addition to the link between high oil prices and biofuel policies, it has also led to a more direct increase in food prices, as oil is one of the inputs in the production of fertilizers, pesticides and fuel for tractors, machinery and irrigation pumps. It also affects the costs of transporting food commodities.

The World Bank and ESCWA have softened a strong relationship Between oil prices and food prices, especially when the oil price exceeds 60 US dollars per barrel. Agriculture is second only to transportation in terms of the intensity of its use of oil for energy. Jane Harrigan, in his book The Political Economy of Food Sovereignty, estimated that rising energy costs led to an increase in transportation costs and production costs in corn, wheat, and soybeans. We conclude with the structural factors related to the supply side of the food crisis. In addition to the weakness of international markets, the weak supply of food production, low stock levels, climate change, natural disasters, and trade policy such as export bans, as well as the idea of ​​low food productivity is the underlying cause of the crisis.

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