NewEnergyNews: BIOFUELS AND FOOD, BY THE NUMBERS

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    Wednesday, June 18, 2008

    BIOFUELS AND FOOD, BY THE NUMBERS

    From the NY Times’ Tom Friedman: “For Egypt’s poor, who make up 40 percent of the population, food makes up 60 percent of their household budget. When wheat prices double, because more U.S. farmers plant corn for biofuels, it is devastating for Egyptians, who depend on imported American wheat for their pita bread. Bread riots are now a daily occurrence here.”

    After crunching the numbers, researchers at
    New Energy Finance (NEF) come to a slightly different conclusion. Michael Liebreich, CEO, NEF: “Our team has found that there is no “Exhibit A” to prove the innocence, or guilt, of biofuels simply and easily.”

    A detailed assessment of factors concluded supply/demand impacts on food prices equal to a 4% worldwide decrease in agricultural land use. Primary among supply/demand factors was the increase in world population. Second is biofuels development. The study estimated biofuels increase present worldwide grain prices 8%.

    NEF found no accurate way to assess the portion of supply/demand attributable to market speculators.

    Overall conclusion? Michael Liebreich, CEO, NEF: “In grains as a whole, the rise of biofuels has been much less important than population growth in the price rises. In food oils, biofuels have been relatively more significant as a price stimulant, albeit far from a predominant one.”

    Liebreich and NEF recommend 3 actions for the biofuels industry to establish its relative “innocence” in food price escalations: (1) Communicate that biofuels are only 1 factor, (2) clarify the favorable environmental impacts of biofuels and (3) step up development of waste and non-food crop biofuels.

    There is one thing this strategy cannot change: AGROfuels have a measurable and significant upward impact on world food prices and it is one impact governmental policies can favorably affect for the sake of those Egyptians and their pita bread.


    Food prices are up. (click to enlarge)

    Biofuels not main player in the food price heist
    Michael Liebreich, 30 May 2008 (REN21)

    WHO
    New Energy Finance (NEF) (Michael Liebreich, CEO)

    WHAT
    A report from NEF (“Drivers of Food Price Increases: Is it fair to blame biofuels?”), summarized by CEO Liebreich at Renewable Energy Policy Network in the 21st Century, assesses statistics on fuel and food prices and concludes biofuel expansion is “one of many culprits” in rising food prices.

    There are a variety of factors. (click to enlarge)

    WHEN
    - 2004 to April 2008: 168% rise in grain prices (dollars/tonne); 136% rise in food oil process (dollars/tonne).
    - 2004 to April 2008: 3.5% world population increase.
    - 2004 to April 2008: 123% increase in oilseed futures contracts trading.

    WHERE
    The NEF study evaluated fundamental drivers of food price increases measured in terms of pressure on the supply and demand for hectares of land.

    WHY
    - 60.5 points of the 168 point increase in grain prices from (1) increase in crude oil costs (costs of farming, i.e. tractor and transport costs, costs of fertilizers, etc.); (2) dollar depreciation; (3) other inputs (land, labor costs)
    - 107.5 points of the 168 point increase in grain prices from changes in supply/demand, part from speculation.
    - Study considered rising populations/consumption per head, agricultural yields, land use, demand from the biofuels industry and animal feed sector. Conclusion: Equivalent to a 4% drop in growing hectares worldwide.
    - 45.6 points of the 136 point increase in food oils, the main biofuels feedstock, is due to crude oil costs, dollar depreciation, land and labor.
    - 91.4 points of the price rise from supply/demand changes.
    - Biofuels and industrial use of food oils drove food oil prices up by 17%, maximum.

    It's complicated. (click to enlarge)

    QUOTES
    - Michael Liebreich, CEO, NEF: “Biofuels have been the second most important supply and demand factor in grains, just after the fall in grain yields in Australia caused by drought.”
    - Michael Liebreich, CEO, NEF: “So, do we say “guilty” or “not guilty”? My judicial summing up would indeed mention the expansion of the biofuel sector, but as only one of many culprits. Our work has shown that input costs have been very important, as well as supply and demand changes.”

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