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NEWS ALERTS | FUEL FOR GLOBAL HUNGER: US CORN PRICES

FUEL FOR GLOBAL HUNGER: US CORN PRICES

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published Published on Oct 19, 2012   modified Modified on Oct 19, 2012
Rising corn prices in the United States brought about by biofuel mandates have cost developing countries 6.6 billion dollars over the past six years, says a study by Global Development And Environment Institute at Tufts University (GDAE). 

Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion, the study concludes. (See highlights and the links below).

The recent spike in world food prices has been linked to use of corn in USA to produce biofuel ethanol, which is added to petrol in that country.

The subsequent increase in food costs has drastically affected levels of world hunger and, in some countries, political stability, according to a related report, “Fuelling the Food Crisis: The Cost to Developing Countries” on US Corn Ethanol Expansion published by the global watchdog ActionAid. The report also warned of the consequences of current US policies.

Timothy Wise, director of the Research and Policy Program at Tufts University and the study’s lead author, noted, “Increased food prices triggered the Arab Spring, and US ethanol production contributed to those food spikes.”

This is the third food price spike in the last five years, and this time the finger is being pointed squarely at biofuels, says Wise.  

Corn prices in the United States have steadily increased since 2007, when new legislation known as the Renewable Fuel Standard began requiring the use of a percentage of corn in the production of a biofuel called ethanol. Today, ethanol is added to petrol across the country.

The debate over biofuels has grown urgent since food prices first spiked in 2007-2008, ushering in a food crisis characterised by repeated jumps in global food prices. Prices for most staple foods doubled, fell when the bubble burst in 2009, then jumped again to their previous high levels in 2010-2011. After a brief respite in the first half of this year, the US drought triggered a new wave of price spikes, the third in just five years. Corn prices were particularly hard-hit, reaching record levels of more than $8.00/bushel, and more than $300 per metric tonne. Before the first spikes, prices had languished around $100/metric tonne.

According to the report, 40 percent of all US-grown corn is now being used to fulfil these ethanol mandates – up from just five percent a decade ago. And because 40 percent of all U.S.-grown corn translates to 15 percent of global corn production, corn prices have increased by 21 percent over the past six years. That increase has cost the global economy 11.6 billion dollars, 6.6 billion of which fell on developing countries.

This year, the situation in the United States has been exacerbated by the worst drought in fifty years, which resulted in a harvest about 20 percent smaller than expected. Even so, the Renewable Fuel Standard requirements have not changed. Unfortunate weather circumstances in the United States will only add to the burden felt by developing countries importing US-grown food.

Highlights

* Rising corn prices in the United States brought about by biofuel mandates have cost developing countries 6.6 billion dollars over the past six years.

* Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion.

* Thirteen developing countries incurred per-capita impacts greater than Mexico’s, and they include a wide spectrum of large and small countries from all regions of the developing world – Colombia, Malaysia, Botswana, Syria.

* North African countries saw large impacts, with $1.4 billion in ethanol-related import costs, led by Egypt ($679 million). Other countries experiencing social unrest – Tunisia, Libya, Syria, Iran, Yemen – also suffered high impacts, highlighting the link between rising food prices and political instability.

* Central American countries felt impacts nearly those of Mexico, scaled to population. The region has seen its dependence on food imports rise over the last 20 years, and corn imports cost an extra $368 million from 2006-11 due to U.S. ethanol expansion. Guatemala saw the largest impacts, with $91 million in related costs.

* Latin American partners to trade agreements with the United States saw high costs, as import-dependence grows. The six-year ethanol-related cost of corn imports was $2.4 billion for Latin American nations involved in NAFTA, CAFTA-DR, and the bilateral agreements with Panama, Colombia, Peru, and Chile.

The paper recommends changes to U.S. biofuels policies, including a more flexible renewable fuels mandate and actions on the part of global leaders to curb biofuel expansion. 

For more information click on the links below:
 

FUELING THE FOODCRISIS: The Cost to Developing Countries of US Corn Ethanol Expansion

http://www.ase.tufts.edu/gdae/Pubs/rp/ActionAid_Fueling_Fo
od_Crisis.pdf

http://www.ase.tufts.edu/gdae/policy_research/GlobalEthano
lCosts.html

 

GLOBAL DEVELOPMENTAND ENVIRONMENT INSTITUTE WORKING PAPER NO. 12-02

http://www.ase.tufts.edu/gdae/Pubs/wp/12-02WiseGlobalBiofuels.pdf

 

Food vs. Fuel – U.S.Biofuels and the Global Food Crisis

http://www.ase.tufts.edu/gdae/policy_research/FoodVsFuel.html

 

Biofuels and foodsecurity – Balancing needs for food, feed, and fuel

http://www.ifpri.org/publication/biofuels-and-food-security

 

In a world hungry forbiofuels, food security must come first

http://www.guardian.co.uk/global-development/poverty-matte
rs/2012/oct/17/world-hungry-biofuels-food-security?newsfee
d=true

 

Biofuel vs. FoodSecurity

http://www.genecampaign.org/Publication/Article/AG-Food-Se
curity/Biofuel%20vs%20food%20security.pdf

 

Biofuels andhousehold food security

http://www.fao.org/docrep/010/ai411e/AI411E04.htm

 

EU cuts use offood-based biofuels

http://finchannel.com/news_flash/World/117996_EU_cuts_use_
of_food-based_biofuels_/

 

Biofuel vs. FoodSecurity


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