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Growing Controversy Over Biofuels, Food Security, & Rising Food Prices

Thomas Omestad reported on Thursday at U.S. News & World Report Online
that, "A gathering of world political and agricultural policy leaders next
week in Rome will attempt to point a way out of the perils flowing from a
surge in food prices that is impoverishing millions of people and causing
public outrage that has rattled some governments.

"And although the United States is the world's top producer of food and the
No. 1 donor of food aid, the way Washington gives that assistance and its
promotion of corn-based biofuels will face tough scrutiny at the summit
called by the United Nations Food and Agriculture Organization. The meeting
may produce a call for policy guidelines on the manufacture of biofuels."

The article noted that, "The U.S. delegation to the June 3-5 conference will
be led by Agriculture Secretary Ed Schafer, who seemed to anticipate some of
the expected criticism in remarks made today. 'The United States contributes
more than one half of all the world's food aid,' he said, adding that U.S.
assistance to at-risk countries would be expanded immediately."

And later, the U.S. News article added that, "Schafer defended U.S.
subsidies and trade protection for corn-based ethanol‹a policy that some
food analysts and U.N. officials have cited as a factor in shifting productive land away from other crops and pushing up food prices. Schafer played down the impact."

On Saturday, John W. Miller reported in The Wall Street Journal that, "An agriculture summit in Rome in the coming week promises to turn into a food fight over biofuels.

"Along with some 60 heads of state, the United Nations Food and Agriculture
Organization has invited a dozen corporations to the three-day meeting,
which starts Tuesday, to talk about how to counter the effects of global
food inflation, especially in poor countries.

"The debate is likely to shift toward the impact that government policies
are having on the cost and availability of arable land. Governments in
Europe and the U.S. encourage farmers to plant crops such as rapeseed and
corn by offering subsidies and tax breaks for biofuels."

The Journal article stated that, "Politicians are taking sides. 'Diverting
around 100 million metric tons of cereals to biofuels has had an impact on
food prices,' FAO Director-General Jacques Diouf told the Reuters news
agency this past week. World Bank President Robert Zoellick says lowering
U.S. and EU public subsidies for biofuels would deflate food prices. But so
far, at least, the EU and U.S. governments are sticking with biofuels, a key
plank in their efforts to cut the carbon-dioxide emissions believed to cause
global warming and to cut reliance on crude-oil imports.

"'The problem is rising food and feed demand in Asia,' EU Agriculture
Commissioner Mariann Fischer Boel said in a speech this past week. She
argues that only 1% of EU arable land is used to plant biofuels, making the
impact on land prices negligible."

In a related article, Colum Lynch reported in today's Washington Post that, "U.N. Secretary General Ban Ki-moon will issue an urgent plea to world leaders at a  

foodsummit in Rome on Tuesday to immediately suspend trade restrictions, agricultural taxes and other price controls that have helped fuel the highest food prices in 30 years, according to U.N. officials.

"Ban is seeking to prod more than two dozen nations that have imposed such
measures in the current crisis to reverse course, saying their actions have
driven prices higher. The United Nations will also urge the United States
and other nations to consider phasing out subsidies for food-based biofuels
‹ such as ethanol ‹ and to hammer out a pact with poor countries that would
reduce agricultural tariffs and subsidies that have harmed poor farmers.

"The immediate goal of the June 3-5 summit will be to secure a massive flow
of assistance to the world's hungriest people and to ensure that subsistence
farmers across the globe will have the seeds and fertilizers they need to
plant their crops this season. World Bank President Robert B. Zoellick on
Thursday announced the lending agency would issue $1.2 billion in financing
for agricultural support, including $200 million in grants to help the
world's poorest countries, starting with Djibouti, Haiti and Liberia."

The Post article explained that, "A World Bank analyst estimated that
biofuel production has accounted for 65 percent in the rise of world food
prices, while the IMF has concluded that biofuel production is responsible
for 'a significant part of the jump in commodity prices.'

"But the United States has defended the production of biofuels, saying it
has driven down oil consumption over the past three years. 'According to our
analysis, the increased biofuels production accounts for only 2 to 3 percent
of the overall increase in global food prices,' said Agriculture Secretary
Ed Schafer, who will lead the U.S. delegation in Rome. 'This is not distorting the global price of food,' he added. 'This is how we're going to create energy independence in this country. And we urge others in the face of this rising price problem with energy to look at alternative means, one of which certainly is biofuels.'"

Philip Brasher, writing in Sunday's Des Moines Register, noted in part that, "U.S. ethanol producers and farm groups say biofuel production is being unfairly blamed for global increases in food costs.
These groups see the Grocery Manufacturers Association, a Washington-based
trade group that represents companies such as General Mills and Kraft,
behind the international concerns that are being raised about ethanol and
food prices.

"'Some of the international organizations that have looked at this are just
looking at the talking points from (the grocery association),' said Bob
Dinneen, president of the Renewable Fuels Association.

"Economists with the International Food Policy Research Institute, a
Washington-based analyst funded by governments and foundations, agree that
biofuel production is only one of several factors behind the recent food
price increases."

***
More specifically on the issue of U.S. food prices, Reuters news reported on Thursday that, "U.S. food prices will rise a stiff 9 percent a year through 2012, the largest increase since 1979 and the result of record-high crop prices, the head of an economic consulting company said on Thursday.

"The projections by Bill Lapp of Advanced Economic Solutions are higher than
the latest U.S. Agriculture Department forecast for this year. USDA and Lapp
have increased their estimates by 1.5 percentage points since February.

"During a telephone news conference, Lapp said he was completing a new analysis of food and commodity prices. He foresaw average corn prices of $5.25 a bushel through 2012, with wheat around $6.50 and soybeans near $11.

"'When I do that analysis and look at the relationship between that and food
prices, I get a 2008-12 average annual rate of increase in the consumer
price index for food of 9.0 percent,' he said."

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