Ethanol Suppliers Claim Impact on Food Prices is Exaggerated

ePURE says it wants to set the record straight at a time when biofuels production is being blamed for aggravating rising commodity prices linked to a massive drought in the US Midwest that has affected much of the US corn crop.

28 Aug 2012 --- The European Renewable Ethanol Association (ePURE) has rejected claims that ethanol production is driving up food prices, claiming that the role of ethanol in food price increases is massively exaggerated. Food prices rose 6% overall last month, driven by a devastating drought in the United States and rising petrol costs that make production and distribution more costly. The UN Food and Agriculture Organisation (FAO) reported that maize prices soared 23%, wheat was up 19% and sugar 12% compared to June.

ePURE says it wants to set the record straight at a time when biofuels production is being blamed for aggravating rising commodity prices linked to a massive drought in the US Midwest that has affected much of the US corn crop. Careful analysis of agriculture and commodities markets reveals a very complex situation that is not easily described by a simple food v fuel narrative. Quite often key facts are ignored in the debate, which only serves to damage public confidence in those biofuels that are produced sustainably and responsibly, such as European ethanol.

Biofuels production has much more positive effects on the food sector and global agricultural produc:on than negative ones, with raising farm income and improving investment in the farm sector some of many of the benefits as well as the production of important animal feed co---products.

“Global grain use for biofuels is miniscule and nowhere near enough to inflate prices significantly. Singling out biofuels for blame for rising food prices is simply reckless and only serves to damage public confidence in good biofuels”, said Mr. Rob Vierhout, Secretary General of ePURE.

“Europe has enough grain to produce both its food AND fuel needs. Blaming biofuels is the lazy op:on – if policy makers are serious about addressing food price volatility then they must tackle the fundamental causes of food price inflation such as volatile oil prices, unchecked financial speculation in food commodities markets, and rising levels of food waste. It is truly unbelievable that, while critics continue to blame biofuels for creating a food crisis, last year in Europe we wasted 50% of our food”, added Mr. Vierhout.

ePURE claims there are several key facts to consider:
??EU grain use for ethanol production is minimal, not enough to affect prices
??Global corn production is historically high and EU wheat production is high, but there is room for improvement
??EU ethanol production does not depend on one crop, like in the US
??EU ethanol is also produced using various non---food materials
??Rising food prices are dictated by a perfect storm of factors, the role of biofuels is minimal
??EU arable land taken out of agricultural production is growing year-on-year
??There is enough food produced but we waste too much of it ??Investment in agriculture is the solution

But the industry’s interpretation is far from universal. The United Nation's Food and Agriculture Organisation (FAO) last month urged the United States to suspend its mandate for producing biofuel to relieve pressure on maize crops amid the nation’s worst drought in 50 years. US livestock producers also called for a suspension of the biofuel policy over feed supply concerns.

In recent years, the World Bank has grown more cautious in its support for biofuel development amid concerns about food and feed supply volatility, with one World Bank agro-economist arguing that EU and US biofuel policies “were the most important factor” in a 2008 food price spike.

“Without these increases, global wheat and maize stocks would not have declined appreciably, oilseed prices would not have tripled, and price increases due to other factors, such as droughts, would have been more moderate,” Donald Mitchell, at the time a World Bank economist, wrote in a report on food prices.

A recent Institute for European Environmental Policy report that calls for the EU to rethink its target of 10% renewable energy use in ground transport by 2020 in part because of the long-term impact of food costs.

The IEEP study, prepared for the ActionAid anti-proverty group, shows the largest price impact on oilseeds and vegetable oils that are refined for biodiesel, with less impact on wheat and maize used to produce ethanol. The report forecasts:
•    Prices for oilseeds rising between 8% and 20% and vegetable oils between 5% and 36% by 2020. These oils are derived from rapeseed and soy plants, as well as non-food plants such as jatropha.
•    Wheat prices rising between 1% and 13% and maize 1% to 22. Grains are mainly used to produce ethanol petrol.
•    Sugar cane and beat rising between 1% and 21% over the next eight years. These are also used for ethanol.