Burning food: why oil is the real villain in the food crisis

Agricultural productivity is simply not growing fast enough. US government data shows global yields per hectare rose 2% a year between 1970 and 1990 and then fell to 1.1% over the succeeding period. Productivity enhancements over the next 10 years are expected to average less than 1% a year. Since world population growth is averaging somewhat over 1%, we are heading for global hunger, with biofuels only hastening the speed.
We can see this in production data from the FAO: the amount of available grain for every person in the world edged downwards last year. The world could try to compensate for faltering productivity growth by expanding the area given over to crops, but this runs the risk of increasing the rate of worldwide deforestation, already causing a fifth of global CO2 emissions.

Lastly, we must consider a thorny economic issue. Government legislation in the US and the European Union – as well as their large subsidies – may have created the ethanol industry, but the refineries can now stand on their own financial feet. With oil at $135 a barrel, it is very profitable to turn the starch in maize into motor fuel. Simply put, food is worth more as petrol than it is on the table, even if the subsidies are removed. The only way of stopping farmers selling their grain to the refineries would be to introduce an outright ban on adding ethanol to petrol.

The IMF may be correct that the rise of biofuels has caused much of the world’s recent food price inflation. But now that we know how to make ethanol efficiently from foodstuffs, it is sky-high oil costs that are keeping up the price of agricultural commodities. For a sustained reduction in food prices, we need oil prices to fall to much lower levels. This would also reduce fertiliser and diesel expenses, helping to restrain the upward march in agricultural prices.

Guardian