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Biofuels Halt Would Ease Food Prices - Ag Group

Date: 30-Apr-08
Country: US
Author: Missy Ryan

"Our models analysis suggest that if a moratorium on biofuels would be issued in 2008, we could expect a price decline of maize by about 20 percent and for wheat by about 10 percent in 2009-10. So it's this significant," Joachim von Braun, who heads the International Food Policy Research Institute (IFPRI), told reporters in a briefing.

"There are biofuels and there are biofuels, good and bad ones ... waste-based and sugarcane-based can be very good," von Braun said.

The role of burgeoning biofuel production, which diverts food crops like corn to make ethanol, has become a sharply divisive issue in the United States and elsewhere as the world grapples with a dramatic shock in food prices.

The soaring cost of basic staples like milk and bread has sparked unrest and deepened political instability in many corners of the developing world.

Biofuel supporters in the United States call the ethanol criticism wrong-headed and see the technologies as a needed alternative to America's dependence on foreign oil.

That is especially important, they say, with oil prices breaking new ground close to $120 a barrel.

US food prices are expected to jump by up to 5 percent this year. At the same time, about a quarter of the US corn crop will go toward ethanol.

Yet the Bush administration sees energy, not ethanol, as the biggest price driver, and describes a future for biofuels that leans heavily on alternate sources like switchgrass.

"The truth of the matter is, it's in our national interest that we -- our farmers -- grow energy, as opposed to us purchasing energy from parts of the world that are unstable or may not like us," President George W. Bush said on Tuesday.

BACKLASH BREWING?

With more costly food and fuel exacerbating the pain of a slowing economy, and the ranks of needy Americans receiving government food vouchers on the rise, a backlash appears to be taking root in the United States.

Some state governments are publicly reconsidering their ethanol policies, and a few big meat and poultry companies are asking for steps to cool the high cost of animal feed.

In Von Braun's eyes, crops like sugar cane offer greater promise for biofuels. "The opportunities of agriculture being an energy producing sector should not in principle be discarded," he said.

World leaders have coalesced around the need for an urgent fix to the deepening food crisis. The United Nations, for its part, is pleading with donor countries to pad strained food aid budgets and help avert a spike in global hunger.

The source of this "perfect storm" in global prices is usually attributed to the confluence of several factors, including poor weather in exporting nations, increasing demand in growing nations like India and China, and biofuels.

Von Braun also said that changing supply-and-demand dynamics had been driving soaring crop prices through the end of last year, but that market speculation and government steps to curb prices -- such as export bans -- had taken on an increasingly influential role in 2008.

"Especially in the last couple of months, price increases far exceeded what global supply and demand would suggest to you. That's then a response to government erratic trade policies, the export bans, and the opening up the opportunities also for speculative trading," he said.

(Additional reporting by Russell Blinch in Washington; Editing by Marguerita Choy)

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