Saturday, July 5, 2008

Food price linkage to ethanol

Interesting article, related to my previous post: Secret report: biofuel caused food crisis. Internal World Bank study delivers blow to plant energy drive.

The key paragraph (as it relates to my last post):

President Bush has linked higher food prices to higher demand from India and China, but the leaked World Bank study disputes that: "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases."

With regards to biofuels, using a food source was always a stupid idea. Waste biomass is a much more plentiful source, one that does not compete with food.

With regards to India and China and my last post, that industrialization and urbanization shift is not something that occurs in a matter of months, like these food price increases.

The article doesn't discuss how much of the food price increases were linked to oil price increases (food must be transported to the market, after all). Analysis I've read in FT and elsewhere seems to think that the oil price increases are not yet fully factored into food prices, implying further price increases are coming.

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