Biofuels to blame for rising food prices

A man fills his tank at a biofuel station in Germany. The German government recently canceled plans to double the amount of ethanol to 10% in gasoline sold nationwide.

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Bob Moon: There's going to be a common theme running through the program today: Energy independence.

Is that idea even realistic? We've tried growing our own energy lately, burning corn and other crops for fuel, and now we're seeing food prices climb.

The Bush administration says it's a small price to pay, but there's word the cost has been way understated. A report leaked from the World Bank blames 75 percent of price rises for wheat and other cereals on biofuel production.

Britain's Guardian newspaper broke the story today and Marketplace's Stephen Beard has details from London.


Stephen Beard: The leaked report was prepared by a senior economist at the World Bank. In effect, it claims that 75 percent of the jump in food prices was caused by Western governments. The U.S. and Europe encouraged farmers to switch away from growing crops for food and into biofuel production. That, the report says, lead to a sharp decline in cereal stocks. That triggered a wave of financial speculation and that pushed up food prices.

Robert Bailey is with the aid agency OXFAM.

Robert Bailey: Poor people in the developing world spend typically between 50 and 80 percent of their income on food, so something that drives the price of food up by 75 percent is absolutely catastrophic for a poor household.

The leaked report contradicts Bush Administration claims that biofuels account for less than 3 percent of the rise in food prices. The Administration says higher demand from India and China is mainly to blame. The report also refutes this. And, says Aditya Chakrabortti of the Guardian newspaper, that may explain why the World Bank didn't publish it.

Aditya Chakrabortti: One source said to me that this report, were it to be published by the World Bank, would put the World Bank in a political hot spot with the White House, because President George Bush has been a great enthusiast for biofuels.

The Bank denies that it suppressed the report. It says it was an only an internal discussion paper.

But now it's out. Campaigners will use it to call for a moratorium on the use of biofuels.

In London, this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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