Unpublished World Bank Report Puts Biofuel Mandates to Blame for 75 Percent Increase in Food Prices

Michael Giberson

On July 4, The Guardian newspaper reported:

Biofuels have forced global food prices up by 75% – far more than previously estimated – according to a confidential World Bank report obtained by the Guardian.

The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.

Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush.

“It would put the World Bank in a political hot-spot with the White House,” said one yesterday….

[The report] argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

Other reviews of the food crisis looked at it over a much longer period, or have not linked these three factors, and so arrived at smaller estimates of the impact from biofuels. But the report author, Don Mitchell, is a senior economist at the Bank and has done a detailed, month-by-month analysis of the surge in food prices, which allows much closer examination of the link between biofuels and food supply.

The report points out biofuels derived from sugarcane, which Brazil specializes in, have not had such a dramatic impact.

Also July 4, the Marketplace radio news program ran a brief piece with the reporter.

(HT to Tom Philpott at Gristmill.)

UPDATE: As AWench points out in the comments, and as the WSJ Environmental Capital reports, the report in The Guardian was a little off target. The report wasn’t secret or suppressed, just a working paper making the rounds, still being polished by the author.

2 thoughts on “Unpublished World Bank Report Puts Biofuel Mandates to Blame for 75 Percent Increase in Food Prices

  1. There’s already a discussion going on at Gristmill, but I’m commenting here since I’d rather not give away 71 pieces of my identity just to comment (and admittedly I’ve never heard of Gristmill)

    The Guardian article is annoyingly ambiguous. Maybe I just don’t read the newspaper enough. What’s 75% — 75% of 2002 prices, or 75% of the 140% increase since 2002? What comprises the composite commodity called “food”? Is 140% (incidentally a compound annual growth rate of less than 16%) real or nominal? What is “a much longer period” — more years back, more years forward, or just larger and therefore seasonally-irrelevant intervals in the time series?

    To my knowledge, the US government’s 3% figure applied only to corn ethanol and not biofuels generally. I don’t know which claim the article is referring to, but Ed Lazear’s testimony, on which Ed Schafer based his own statements, appeared on May 14, after the date of the World Bank report. Lazear’s said that ethanol contributed 3% of the 43% food inflation over one year. Around the same time USDA/ERS came out with a report that said the contribution of biofuels was I think 10%. It repeatedly cites “USDA Agricultural Projections to 2017”, which I thought was an internal data source but turns out to be this report. I haven’t read the latter to see if it actually contains enough data to calculate figures. I remember around the time there were some stories — I don’t remember if this blog picked up on them — pointing out the contradiction which was really just because Schafer used the word “biofuels” when he meant “ethanol”.

    I think there was another study early this spring that said eliminating some biofuel subsidy would decrease some food price by some two-digit percent but I can’t remember where. I now wish I’d kept better tabs on my links.

    I guess all this dwarves my sentiment that speculators aren’t really to blame.

    Anyway my conclusion is that the differences are probably due more to methods and definitions (and of course some retarded media interpretations) than some conspiracy to cover things up. We’ll have no idea what the World Bank report is comparable to, what 75% or 3% or anything means until they show us the raw data and assumptions and computations we can replicate. Is there a good way to get these things asap?

  2. Unfortunately, Aditya Chakrabortty, who reported this story in the Guardian, didn’t do the necessary homework.

    This is another case of dodgy dossier, I’m afraid.

    The information cited was neither secret nor recent. It was not suppressed, in fact, most of the information is summarised in a PowerPoint Presentation given by Internationally Respected Senior Economist Don Mitchell at the June 2007 Global Agri-Food Forum in Mexico City. It’s freely available on the web. Here’s the link: http://www.foroglobalagroalimentario.org.mx/ponencias/2007/magistrales/Donald_Mitchell.eng.pdf

    The reason the so-called ‘secret report’ was leaked appears to be in response to 2 major reports published by the UN and the IMF on the 1st of July, calling for controlled capital flows (and market speculation) to undeveloped and developing regions. The World Bank is decidely hostile to such suggestions. It was no accident that Don Mitchell’s PowerPoint presentation resurfaced on the 4th of July.

    For a fuller, albeit amateur, analysis go to: http://bentsocietyblog.blogspot.com/

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