By Lesley Wroughton
WASHINGTON, July 28 (Reuters) - Large increases in biofuels
production in the United States and Europe are the main reason
behind the steep rise in global food prices, a top World Bank
economist said in research published on Monday.
World Bank economist, Don Mitchell, concluded that biofuels
and related low grain inventories, speculative activity, and
food export bans pushed prices up by 70 percent to 75 percent.
The remaining 25 percent to 30 percent was due to a weaker
U.S. dollar, higher energy costs and related rises in
fertilizer and transport costs, he wrote.

Read on, … An unfinished version of the research that surfaced in news
stories sparked a heated debate earlier in July, with trade
groups for the ethanol industry calling the 75 percent figure
“a stretch” and others saying it confirmed the dangers of
current biofuels policies.

The outcome of Mitchell’s research is controversial because
it goes beyond most other estimates for the impact of biofuels
on rising food prices.

Still, its research corresponds somewhat with the
International Monetary Fund, which estimated in May that
biofuels accounted for 70 percent of the increase in maize
prices and 40 percent in soybean prices.

Meanwhile, the Bush Administration has estimated that
biofuel production pushed food prices higher by 2 to 3 percent.
Hoping to wean the country off foreign oil, Washington has
boosted incentives and mandates for alternative fuels made from
food crop.

But Mitchell said without the increase in biofuels
production, global wheat and maize stocks would not have
declined, oilseed prices would not tripled and price increases
due to other factors, such as drought, would have been more
moderate.

Also, food export bans by countries trying to preserve food
supplies and speculative activities would not have occurred
because they were responding to rising prices.
“The large increases in biofuels production in the U.S. and
EU were supported by subsidies, mandates, and tariffs on
imports,” Mitchell said in the research that looks at rapid
rises in food prices since 2002. “Without these policies,
biofuels production would have been lower and food commodity
price increases would have been smaller,” he added.
A widely respected agricultural economist, Mitchell said
biofuels policies that encourage subsidized production need to
be re-thought because they’re hurting poor countries.
He said the increase in grain consumption in developing
countries was moderate and did not lead to the large price
increases.
Growth in global grain consumption, excluding biofuels, was
only 1.7 percent a year from 2000 to 2007, while yields grew by
1.3 percent and area grew by 0.4 percent, which would have kept
global demand and supply roughly in balance, he said.
The United States is the largest producer of ethanol from
maize and is expected to use about 81 million tons for ethanol
in the 2007/08 crop year. Meanwhile, Canada, China and the
European Union used roughly 5 million tons of maize, which was
about 11 percent of the global maize crop.
The use of maize for ethanol in the United States has
global implications because the U.S. produces about one-third
of the world’s maize and two-thirds of global exports, and used
25 percent of its production for ethanol in 2007/08.
Brazil’s ethanol production did not push food prices
appreciably higher because Brazilian sugar cane output has
increased rapidly and sugar exports have nearly tripled since
2000, Mitchell said.
The increase in cane production has been large enough to
allow sugar output to rise from 17.1 million tons in 2000 to
32.1 million tons in 2007 and exports to increase from 7.7
million tons to 20.6 million tons.