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US Secretary Of State Admits Biofuels Raises Food Prices

By - Source: Tom's Hardware | B 4 comments

Washington DC - U.S. Secretary of State Condoleezza Rice has admitted that the increased production and use of biofuels has helped raise food prices around the world. In a speech given to a gathering of Peace Corps country directors, Rice said biofuels have caused "some effect" on food prices, but added that it was an "unintended consequence" of government policies.

Rice outlined the main reasons for rising food prices and blamed biofuels for just a small part of the problem. "We think that it is not a large part of the problem, but it in fact may be a part of the problem," she said.

Rice said the inability to distribute food to places like Sudan and the low Dollar exchange rate have contributed the most to higher prices. She also highlighted export controls and the "improving diets" of India and China as contributory factors. Yes, I’m scratching my head on that one too.

Corn prices, along with all other staple foods, have risen dramatically in the past few years - since fall 2006, a bushel of corn has risen from about $2.50 each to approximately $6.51. Almost all of US ethanol is made from corn and an estimated 25% of the entire US crop will be used for ethanol production this year.

The US government mandates that 9 billion gallons of ethanol be added to gasoline this year and that will increase to 15 billion gallons by 2015. Farmers and ethanol production plants receive a 51-cent per gallon tax credit for ethanol production. Interestingly enough some countries, like China, have banned using any food crop for biofuel conversion.

The World Bank agrees with Rice and recently released a report on rising food prices. "Increased bio-fuel production has contributed to the rise in food prices," said the report. You can read the World Bank report here.

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    Skarbd , 2 May 2008 16:55
    "She also highlighted export controls and the "improving diets" of India and China as contributory factors. Yes, I?m scratching my head on that one too."

    This is simple. As a country grows richer and creates a larger middle class, they eat more meat. Animals require more grain (Feed) to produce the meat that people will eat, than if that grain was used to create pasta (Simple example).

    So the more meat eaters you have, the more grain is required, prices go up. so as china eats more meat, more grain is required. The use of grain for biofuels is not helping.
  • -1 Hide
    Skarbd , 2 May 2008 16:58
    "She also highlighted export controls and the "improving diets" of India and China as contributory factors. Yes, I’m scratching my head on that one too."

    This is simple. As a country grows richer and creates a larger middle class, they eat more meat. Animals require more grain (Feed) to produce the meat that people will eat, than if that grain was used to create pasta (Simple example).

    So more meat eaters in China and India = more grain required. Also the use of wheat for American biofuels is not helping.
  • -1 Hide
    Skarbd , 2 May 2008 17:01
    bah didn't realise first post had been committed. Sorry.
  • 0 Hide
    sgtmattbaker , 8 January 2010 22:28
    Of course it makes the price of food go up. It is stupid to use edible crops for fuel, biofuel can be made out of the refuse by-product of crops. I have heard that 4 times as much ethanol can be made from the stalks of corn plants as opposed to using the corn itself.