The New York Times (pg. A1)  [Printer-friendly version]
April 15, 2008

FUEL CHOICES, FOOD CRISES AND FINGER-POINTING

By Andrew Martin

Elisabeth Rosenthal and Steven R. Weisman contributed reporting.

The idea of turning farms into fuel plants seemed, for a time, like
one of the answers to high global oil prices and supply worries. That
strategy seemed to reach a high point last year when Congress mandated
a fivefold increase in the use of biofuels.

But now a reaction is building against policies in the United States
and Europe to promote ethanol and similar fuels, with political
leaders from poor countries contending that these fuels are driving up
food prices and starving poor people. Biofuels are fast becoming a new
flash point in global diplomacy, putting pressure on Western
politicians to reconsider their policies, even as they argue that
biofuels are only one factor in the seemingly inexorable rise in food
prices.

In some countries, the higher prices are leading to riots, political
instability and growing worries about feeding the poorest people. Food
riots contributed to the dismissal of Haiti's prime minister last
week, and leaders in some other countries are nervously trying to calm
anxious consumers.

At a weekend conference in Washington, finance ministers and central
bankers of seven leading industrial nations called for urgent action
to deal with the price spikes, and several of them demanded a
reconsideration of biofuel policies adopted recently in the West.

Many specialists in food policy consider government mandates for
biofuels to be ill advised, agreeing that the diversion of crops like
corn into fuel production has contributed to the higher prices. But
other factors have played big roles, including droughts that have
limited output and rapid global economic growth that has created
higher demand for food.

That growth, much faster over the last four years than the historical
norm, is lifting millions of people out of destitution and giving them
access to better diets. But farmers are having trouble keeping up with
the surge in demand.

While there is agreement that the growth of biofuels has contributed
to higher food prices, the amount is disputed.

Work by the International Food Policy Research Institute in Washington
suggests that biofuel production accounts for a quarter to a third of
the recent increase in global commodity prices. The Food and
Agriculture Organization of the United Nations predicted late last
year that biofuel production, assuming that current mandates continue,
would increase food costs by 10 to 15 percent.

Ethanol supporters maintain that any increase caused by biofuels is
relatively small and that energy costs and soaring demand for meat in
developing countries have had a greater impact. "There's no question
that they are a factor, but they are really a smaller factor than
other things that are driving up prices," said Ron Litterer, an Iowa
farmer who is president of the National Corn Growers Association.

He said biofuels were an "easy culprit to blame" because their
popularity had grown so rapidly in the last two or three years.

Senator Charles E. Grassley, Republican of Iowa, called the recent
criticism of ethanol by foreign officials "a big joke." He questioned
why they were not also blaming a drought in Australia that reduced the
wheat crop and the growing demand for meat in China and India.

"You make ethanol out of corn," he said. "I bet if I set a bushel of
corn in front of any of those delegates, not one of them would eat
it."

The senator's comments reflect a political reality in Washington that
despite the criticism from abroad, support for ethanol remains solid.

Representative Jim McGovern, Democrat of Massachusetts, said he had
come to realize that Congress made a mistake in backing biofuels, not
anticipating the impact on food costs. He said Congress needed to
reconsider its policy, though he acknowledged that would be difficult.

"If there was a secret vote, there is a pretty large number of people
who would like to reassess what we are doing," he said.

According to the World Bank, global food prices have increased by 83
percent in the last three years. Rice, a staple food for nearly half
the world's population, has been a particular focus of concern in
recent weeks, with spiraling prices prompting several countries to
impose drastic limits on exports as they try to protect domestic
consumers.

While grocery prices in the United States increased about 5 percent
over all in the last year, some essential items like eggs and milk
have jumped far more. The federal government is expected to release
new data on domestic food prices Wednesday, with notable increases
expected.

On Monday, President Bush ordered that $200 million in emergency food
aid be made available to "meet unanticipated food aid needs in Africa
and elsewhere," a White House statement said.

His spokeswoman, Dana M. Perino, said the president had urged
officials to look for additional ways to help poor nations combat food
insecurity and to come up with a long-term plan "that helps take care
of the world's poor and hungry."

Skeptics have long questioned the value of diverting food crops for
fuel, and the grocery and live- stock industries vehemently opposed an
energy bill last fall, arguing it was driving up costs.

A fifth of the nation's corn crop is now used to brew ethanol for
motor fuel, and as farmers have planted more corn, they have cut
acreage of other crops, particularly soybeans. That, in turn, has
contributed to a global shortfall of cooking oil.

Spreading global dissatisfaction in recent months has intensified the
food-versus-fuel debate. Last Friday, a European environment advisory
panel urged the European Union to suspend its goal of having 10
percent of transportation fuel made from biofuels by 2020. Europe's
well-meaning rush to biofuels, the scientists concluded, had created a
variety of harmful ripple effects, including deforestation in
Southeast Asia and higher prices for grain.

Even if biofuels are not the primary reason for the increase in food
costs, some experts say it is one area where a reversal of government
policy could help take pressure off food prices.

C. Ford Runge, an economist at the University of Minnesota, said it is
"extremely difficult to disentangle" the effect of biofuels on food
costs. Nevertheless, he said there was little that could be done to
mitigate the effect of droughts and the growing appetite for protein
in developing countries.

"Ethanol is the one thing we can do something about," he said. "It's
about the only lever we have to pull, but none of the politicians have
the courage to pull the lever."

But August Schumacher, a former under secretary of agriculture who is
a consultant for the Kellogg Foundation, said the criticism of
biofuels might be misdirected. Development agencies like the World
Bank and many governments did little to support agricultural
development in the last two decades, he said.

He noted that many of the upheavals over food prices abroad have
concerned rice and wheat, neither of which is used as a biofuel. For
both those crops, global demand has soared at the same time that
droughts suppressed the output from farms.