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Biofuels major driver of food price rise: World Bank

Large increases in biofuels production in the United States and Europe are the main reason behind the rise in global food prices, a World Bank economist said in research published on Monday.

World Bank economist, Don Mitchell, concluded that biofuels contributed 70% to 75% of the increase in food commodity prices was due to biofuels and related low grain stocks, speculative activity and food export bans. The remaining 25% to 30% was due to a weaker US dollar, higher energy costs and related rise in fertilizer and transport costs, he wrote.

A copy of an unfinished version of the research that surfaced in news stories sparked a heated debate earlier in July because it goes beyond most other estimates for the impact of biofuels on rising food prices. “The large increases in biofuels production in the US and EU were supported by subsidies, mandates, and tariffs on imports,” Mitchell said in research that studies the rapid rise 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.

Mitchell, who is widely respected for his work on global agricultural policies, said biofuels policies that encourage subsidized production need to be reconsidered. 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% a year from 2000 to 2007, while yields grew by 1.3% and area grew by 0.4%, which would have kept global demand and supply roughly in balance, he said. (Reuters)