Ecofys 2013 Biofuels and Food Security

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Biofuels and food securityRisks and opportunities


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Chamber of Commerce 301611#1

Biofuels and food securityRisks and opportunities

By: Carlo HamelinckDate: August 2013

Project number: BIE!13"#$

© Ecofys 2013 by order of: ePURE


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Summary

!is compre!ensi"e o"er"ie# of t!e main aspects of t!e interrelation bet#een food and biofuels

synt!esi$es pre"ious researc! on t!e sub%ect& 't addresses t!e causality bet#een biofuels production(

)lobal crop commodity prices and e"entual implications for food security( especially in poor re)ions

and for poor !ouse!olds& !is o"er"ie# attempts to brin) to)et!er t!e rele"ant economic forces

influencin) )lobal *and local+ food prices( many of #!ic! are absent in ot!er analyses& !us( it

addresses lo# stock le"el impacts on price "olatility( !o# c!eap food encoura)es #aste( to #!at

e,tent )lobal prices transmit to local prices across re)ions( and #!y !i)! prices encoura)e local

a)ricultural in"estment and food security&

-ur analysis leads to t!e follo#in) conclusions:

• 2010 crop production #as enou)! to feed 12 billion people and t!e #orld can produce more.

• /un)er and po"erty !a"e steadily decreased o"er t!e past fe# decades.

• ocal !un)er is primarily caused by yield )aps( food #aste( poor infrastructure( lack of

a)ricultural in"estments( lack of local market or)anisation( conflicts and bad !ar"ests( not by

reduced e,ports from de"eloped countries.

• Biofuels can !elp to reduce food price "olatility in t!e EU and in de"elopin) economies.

• /i)!er food and commodity prices can impro"e food security( especially in de"elopin) countries.

• 't is uncertain #!et!er EU et!anol raises or lo#ers t!e o"erall price of food& EU et!anol !as !ad

small impacts on )lobal starc! and su)ar feedstock prices. t!e !istoric impact of EU biofuels

demand until 2010 increased #orld )rain prices by about 12 and( #it!out any cap on crop

based biofuel production may lead to anot!er 1 increase t!rou)! 2020.

• EU !istorical biodiesel demand for t!e same period likely increased oilseed prices by around

and( #it!out any cap( may increase future prices by around 10.

• !e prices of primary )lobal a)ricultural commodities *from #!ic! biofuels are produced+ are not

directly correlated to food prices( bot! because local food markets are often disconnected from

)lobal markets and also because commodity costs are often only a small component of final food

production costs& !e terms 4primary a)ricultural commodities5 and 4food5 are not fun)ible.

• Protein ric! coproducts from et!anol and biodiesel production a"oid land use else#!ere.

• 6)ricultural commodity prices are stron)ly linked to t!e oil price& Biofuels could reduce oil price

increases and as suc! limit future commodity price increases.

• 'n no case are biofuels t!e lar)est market for )lobally traded a)ricultural commodities& 7or starc!

feedstocks( t!e )lobal trade is dri"en by animal feed demand( #it! !uman and biofuel demand

eac! under 8& !e )lobal trade in su)ar feedstock is dri"en by su)ar. biofuels are t!e second

lar)est dri"er( albeit mostly at national le"els& 7or oilseeds( t!e )lobal trade is dri"en primarily by

animal feed demand( secondarily by !uman food markets and only t!irdly by biodiesel.

• Systemic factors( like reduced reser"es( food #aste( speculation( transportation issues( stora)e

costs and problems( and !oardin) play a muc! lar)er role in local food prices& !ese factors can

be sol"ed and s!ould )et muc! more attention&

9e are open to recei"in) any additional remarks( data or "ie#s( at biofuelsecofys&com&


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able of contents

%ummary iii

1 Intro&uction 1

1&1 Brief !istory on t!e foodfuel debate 1

1&2 7ood security s!ould be central to t!e analysis 2

2 Bio'uels an& global 'oo& (rice &e)elo(ments "

2&1 Sketc! of t!e situation

2&2 Role of biofuels in increasin) food prices ; summary of ot!er studies

2&8 Biofuels mandates could reduce )lobal price "olatility 12

2& !e conseAuences of !i)! food prices for t!e poor are ambi)uous 18

3

Bio'uels an& local 'oo& security 1#

3&1 ransmission of crop prices to food commodity prices 1


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1

'ntroduction

1&1 Brief !istory on t!e foodfuel debate

6s biofuels are produced from crops( t!ere is persistent concern t!at biofuels compete #it! food

production& !e assumption is t!at t!is competition dri"es up food prices and price "olatility and so

causes !un)er& Dany people( includin) "ery di)nified aut!orities( accept t!is simple causality c!ain&

'n -ctober 200=( amidst t!e 200


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!e 9orld Bank report recei"ed se"ere critiAue> for puttin) t!e entire impact of e,port bans and

commodity speculation on t!e s!oulders of biofuels *t!e last market entrant+( #!ile i)norin) ot!er

factors& 6 later *2010+ 9orld Bank report concluded t!at 4t!e effect of biofuels on food prices !as not

been as lar)e as ori)inally t!ou)!t5 10 #!ile anot!er 9orld Bank paper reports t!at 4about ?? of t!e

rise in )lobal food prices is caused by factors ot!er t!an biofuels5 11& 7inally( a 2013 9orld Bank report

concluded t!at biofuels !a"e !ad a "ery minor impact on )lobal prices o"er t!e past decade and t!at

t#o t!irds of crop commodity price increases !a"e been caused by t!e )lobal oil price increase and

e,c!an)e rate mo"ements12& 't is #ort! notin) t!at t!is complete re"ersal of 9orld Bank conclusions

!as been almost entirely i)nored by t!e media and policymakers in bot! 2010 and 2013&

'n t!e past fi"e years( many ot!ers !a"e e,plored t!e role of biofuels in )lobal food prices& !is isoften done by takin) into account ot!er structural and incidental factors contributin) to increasin)

food prices& -t!er *fe#er+ studies e"aluated t!e systematic factors t!at determine !o# food prices

react to demand and supply s!ocks& 'n I!apter Biofuels and )lobal food price de"elopments #e

summarise and analyse t!e key reports&

1&2 7ood security s!ould be central to t!e analysis

!e main concern of Fie)ler( Foellick and t!e leadin) )lobal institutions in"ol"ed in t!e biofuels

debate is( importantly( not about !i)! )lobal food prices but rather about food security for t!e poor(

#!ic! in turn depends on many factors in #!ic! biofuels may play a role( positi"e or ne)ati"e&

9!en considerin) food prices only( t!e impact on po"erty and food security is already ambi)uous&

/i)! food prices indeed increase t!e cost of food for consumers& But t!ey also increase income for

farmers( #!o represent t!e bulk of t!e #orldHs poor& 6nd t!ey stimulate local in"estments in

a)riculture( necessary for future food security& 9!et!er t!e net effects are positi"e or ne)ati"e

depends on #!et!er poor !ouse!olds or countries buy or import( or sell or e,port food13&

!is study aims to s!ed more li)!t on t!e link bet#een biofuels and food security& 7or t!is( #e t!ink

it is important to understand:

• !e distinction bet#een )radual price mo"ements and spikes.

•

!e link bet#een prices of crops( commodities and food( as t!ese are not identical.• /o# fla#s in international a)ricultural trade e,acerbate "olatility.

• 'f a predictable demand for a commodity *biofuels+ can reduce "olatility.

• /o# )lobal commodity prices affect local food prices.

• 9!y some countries are more "ulnerable to !i)! )lobal food prices t!an ot!ers.

• 'f !i)! commodity prices are )ood or bad *or bot!+.

> 7or e,ample: EI@( > uly 200?( critiAue of #orld bank #orkin) paper 4a note of risin) food prices5&10 9orld Bank *Baffes and /aniotis+( 2010( Placin) t!e 200


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•

'f and !o# local food supply in de"elopin) countries is !indered or !elped by biofuels&

!ese factors !a"e been addressed separately in many different studies& !is report summarises and

compares t!eir results& 9it! t!is compre!ensi"e analysis #e aim to present a complete

understandin) of !o# biofuels impact food security and !o# t!ey could impro"e food security&


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2

Biofuels and )lobal food price de"elopments

2&1 Sketc! of t!e situation

Dany of t!e concerns about t!e impact of biofuels on food security follo# from a simple ar)ument: an

increasin) application of basic a)ricultural commodities for biofuels production automatically leads to

crop s!orta)es and increasin) food commodity prices&

Dany studies on t!is matter e,amine food price increases only o"er t!e years up to t!e 200< ; 200?food price spike& 'n 7i)ure 1 #e plot bot! a composite food price inde, and annual biofuels production

"olumes& !e food price inde, is deri"ed by a"era)in) all foodLcrop commodities in t!e 9orld Bank

monitor on commodity prices1& !e increasin)ly faster price sur)e up to t!e uly 200? clima,

coincides #it! increasin) )ro#t! in )lobal biofuels production& -"er t!e ne,t !alf year( !o#e"er(

biofuel production continues to increase #!ile crop prices drop( contradictin) t!e basic ar)ument&

Biofuels production slo#s do#n in 20102011( #!ile anot!er price spike in crop prices occurs in 2011(

a)ain contradictin) t!e simple ar)ument&

*igure 1+ ,lobal cro( commo&ity (rices an& t-e aggregate& (rice o' all commo&ities1". )ersus global bio'uels

(ro&uction )olume1/. bot- normalise&+

1 9orld Bank( 2013( 9orld KataBank @lobal Economic Donitor *@ED+ Iommodities( accessed une 2013&18 Biofuels production "olumes is calculated as t!e sum of biodiesel and bioet!anol production in t!e EU *accordin) to Eurostat+ and t!e rest

of t!e #orld *accordin) to US E'6 Ener)y 'nformation 6dministration+


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'ndeed( t!e c!art abo"e s!o#s t!at a correlation bet#een crop prices and biofuels "olume is absent

after 200?( #!ile crop prices correlate stron)ly #it! t!e prices of all commodities( su))estin) t!at t!e

underlyin) issue is not biofuels( but somet!in) lar)er&

Kisa))re)atin) food prices into subcate)ories( it becomes clear t!at price spikes for some crops !a"e

been stron)er t!an for ot!ers( see 7i)ure 2& 6lmost all crops e,perienced a price spike in 200


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7i)ure 3 compares t!e de"elopment of crop commodity prices #it! ot!er commodities& 7ossil ener)y

and fertiliser( in particular( s!o# "ery stron) price sur)es o"er t!e same period( muc! stron)er t!an

e,perienced in crop commodities& Bot! fertiliser and fossil ener)y are important cost components in

t!e production of crops( #!ic! e,plain t!e ma%or part of food price increases& !ese and ot!er factors

t!at contributed to food price increases are furt!er discussed in Section 2&&

*igure 3+ ,lobal aggregate& commo&ity (rices. normalise&+

2&2 Role of biofuels in increasin) food prices ; summary of ot!er studies

Marious studies !a"e ar)ued and demonstrated t!at biofuels #ere in part responsible for increasin)

food prices o"er t!e past years and t!at t!ey #ill cause more price sur)es in t!e near future& !e

e,tent of t!eir role !as been calculated( often by usin) sop!isticated economic models t!at are

difficult to mutually compare& !e )eneral conclusion of t!ese studies is t!at any a)ricultural demand

s!ock from biofuels in a market t!at is already restricted in options *lo# in stocks( ner"ous and

speculati"e+ leads to a Auick increase in prices&


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'n 2012( 6ction 6id commissioned t!e 'nstitute for European En"ironmental Policy *'EEP+ to re"ie#

t!e e"idence base on t!e link bet#een policy dri"en EU biofuels demand and )lobal a)ricultural

prices1 s!o#s t!at EU2= e,pandin)

biofuel use !ad only a small contribution to t!e !istorical cereal price increases in 200= to 2010& !e

#!eat and coarse )rain prices increased by about 12( compared to a scenario #it!out biofuel

e,pansion in t!e EU2= durin) 20002010& !e price of ot!er crops( includin) oil crops( increased by

about ( compared to a scenario #it!out biofuel e,pansion in t!e EU2= durin) 20002010&

2&3

7ood crop use for biofuels

@lobal biofuels production accounts for a si)nificant part of )lobal use of a number of crops&

76-L-EIK state t!at in t!e 200=0> period( 20 of all su)ar cane( > of bot! oilseeds and coarse

)rains( and of su)ar beet #as used for biofuels20& !ese percenta)es do not consider coproducts&

1 Ecofys( 2012( Pro)ress in rene#able ener)y and biofuels sustainability&20 76-L-EIK( 2011( Price "olatility in food and a)ricultural markets: policy responses&


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able 1 )i"es details on t!e feedstock for EUconsumed biofuels( as calculated in our report for t!e

European Iommission1>( in comparison to t!e )lobal production of t!e respecti"e feedstocks&

able 1+ *ee&stocks 'or E; bio'uels in 2010. com(are& to 2010 global (ro&uction+ Bio'uel ktoe6 in&icates t-e total

)olume o' bio'uels on t-e E; market. s(lit out by 'ee&stock+ *ee&stock )olumes calculate& 'rom bio'uel )olumes. by

accounting 'or all con)ersion ste(s an& material losses along t-e su((ly c-ain. an& by accounting 'or co


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2&

-t!er factors t!at increase food prices

-t!er studies !a"e identified ot!er causal factors of recent food price increasesLspikes *able 2+&

able 2+ *actors t-at increase 'oo& (rices+

*actor %ub>+

t!at structural surpluses #ould decrease and t!at #orld a)ricultural prices #ould 4stren)t!en5 *in

effect meanin) 4rise5( but #it! a more positi"e intonation )i"en t!at in t!e 1>>0s t!e )lobal political

consensus #as t!at !i)!er a)ricultural prices #ere needed+ as a result of t!is2& iberalisation of

23 EI K@ 6@R'( 2011( /i)! commodity prices and "olatility O #!at lies be!ind t!e roller coaster ride 6)ricultural Darkets Brief 1&2 'ISKL76- 2012( rade policy responses to food price "olatility in poor net foodimportin) countries&


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international trade reduced t!e need to keep national stocks and increased )lobal competition e"en

demoti"ated stockpilin)&

9!ile fallin) stocks may increase t!e risk of price spikes( all studies typically find it difficult to

Auantify suc! underlyin) causes t!at impact t!e interaction bet#een demand( supply and price& USK6

su))ests t!at a lon)term trend of )radually slo#in) production )ro#t! likely played a ne)li)ible role

in t!e recent increase in #orld prices28& -n t!e ot!er !and( t!e European Iommission concludes t!at

t!e price elasticity2 kcal per person per day30( #!ic! is indeed more t!an t#ice t!e recommended

a"era)e dietary intake of about 2(00 kcal&

28 USK6( 200?( @lobal a)ricultural supply and demand: factors contributin) to t!e recent increase in food commodity prices *re"ised "ersion

uly 200?+&2


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'n ot!er studies( t!e 76- predicts t!at t!e )lobal a"era)e food intake could rise to 3(0=0

kcalLpersonLday by 208031( #!ic! is more t!an recommended for most a)e and )ender )roups& !e

9orld Bank notes32 t!at t!e 4current )lobal o"er#ei)!t and obesity epidemic is likely to e,pand& !is

#ill present e"en more c!allen)es to t!e post2018 efforts to reduce )lobal malnutrition&5 'n

combination #it! more people consumin) meat( dairy and "e)etable oils( t!is means t!at muc! more

food and feed #ould be reAuired&

6 "ery different factor t!at temporarily increases demand is t!e increased !oardin) in reaction to

s!orta)es in t!e international market& 9e assume t!at t!is can be seen as a !ealt!y correction to t!e

decreased stockpilin) in pre"ious years( discussed in t!e pre"ious section&

Irops for biofuels and biobased materials put additional pressure on t!e crop supply( bot! directly

#!en t!ey tap into t!e e,istin) crop production( but also indirectly as land claimed for t!is feedstock

is not( or is less( a"ailable to food production& !is is a realistic concern and central to t!is report& 'n

Section 2&3( #e discussed t!at t!e demand for feedstock for EU biofuels so far is small compared to

t!e crop "olumes& 'n Section #e discuss !o# biofuel feedstock could be produced #!ile en!ancin)

food supply&

Increasing (ro&uction costs

Iosts of food production !a"e increased as a conseAuence of increasin) ener)y costs& /i)! crude oil

prices directly impacted t!e ener)y costs in crop production( #!ile !i)! natural )as prices increased

t!e production costs for fertiliser& !e USK6 con"incin)ly demonstrates t!at food prices closely follo#

t!e crude oil price( t!ou)! at a reduced le"el& Kurin) t!e 200? food price increase( actually most

nona)ricultural prices rose more t!an a)ricultural prices33& 'n fact( a 2013 9orld Bank report on t!e

sub%ect calculates t!at oil price mo"ements e,plain most of t!e price rise in biofuel feedstock prices

o"er t!e past decade( #it! demand side factors *biofuels( e,panded population( c!an)in) diets and

stocks all lumped to)et!er+ alto)et!er account for less t!an 10 of t!e price increase3(38&

31 76- *6le,andratos and Bruinsma+( 2012( 9orld a)riculture to#ards 2030L2080: t!e 2012 re"ision&32 9orld Bank( 2013( 7ood Price 9atc! Darc!& Else#!ere in t!e same paper( t!e 9orld Bank ar)ues t!at un!ealt!y calories tend to be

c!eaper t!an !ealt!y ones( #!ile referencin) to %unk food in t!e de"eloped #orld& 9!ile t!is !as been taken for )ranted many years( it is

Auestionable #!et!er %unk food is c!eaper t!an !ealt!y food& USK6 find t!at !ealt!y foods actually cost less t!an less !ealt!y foods( see

USK6 2012( 6re !ealt!y foods really more e,pensi"e 't depends on !o# you measure t!e price&33 USK6( 2011( 9!y !a"e food commodity prices risen a)ain3 9orld Bank *Baffes and Kennis+( 2013( on)term dri"ers of food prices&38 'n t!eir summary( Baffes and Kennis conclude t!at stock to use ratios and e,c!an)e rate mo"ements eac! account for about 18&

/o#e"er( t!is is a typo( t!ey mean to #rite 4to)et!er5& 'n t!e te,t t!is is furt!er e,plained 4!at is( oil prices account for almost t#o t!irds

of t!e price c!an)es from 1>>=200 to 200812( follo#ed by SLU ratios and e,c!an)e rate #it! less t!an 10 percent eac!&5


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8arket &ynamics

'ISKL76- and ot!ers find t!at t!e food price increase #as e,acerbated by considerable speculation

acti"ity in t!e markets2(3


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9e find t!at biofuel policies in fact create a rat!er predictable feedstock demand bet#een certain

price band#idt!s& 9e e,pect t!at t!is reduces price "olatility&

'n initial years of biofuels policies in t!e EU( most demand #as supported t!rou)! ta, incenti"es& !is

indirectly set a price cap on feedstocks: #!en t!e feedstock becomes too e,pensi"e( it becomes less

attracti"e for biofuels( since production costs #ould be !i)!er t!an t!e re"enues *in turn set by t!e

fossil reference fuel price plus t!e ta, incenti"e+& 6 problem #as t!at at lo# feedstock prices( t!e

market for biofuels #as "irtually unlimited& !is #as demonstrated by t!e "ery attracti"e @erman

e,cise e,emption sc!eme bet#een 2003 and 200


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9!en biofuels coproducts a"oid pressure on land else#!ere( t!is #ill attenuate any impact from

biofuels on feed and food prices& Doreo"er( biofuelrelated protein meals are lo#erin) prices for

animal feeds in Europe *by dramatically increasin) supply of suc! meals( since biofuels in )eneral

produce lar)er Auantities of suc! meals t!an t!ey produce biofuels t!emsel"es+ and so lo#erin)

prices in related food markets& 'n ot!er #ords( a #!eat et!anol plant may increase t!e price of local

#!eat but may lo#er total feed costs for nearby animal producers. focusin) on only t!e #!eat price

increase and i)norin) t!e total food price impact is t!us irresponsible as it pro"ides an ob%ecti"ely

incomplete picture( especially considerin) t!at biofuel coproducts are produced in suc! lar)e

Auantities&

2&=

Biofuels could reduce t!e price of oil

6s #e !a"e seen( t!e oil price is t!e ma%or dri"er of a)ricultural commodity prices& 't impacts t!e cost

of food t!rou)!out all p!ases of food distribution( stora)e and processin)&

!e use of biofuels reduces t!e demand for crude oil( or slo#s do#n t!e demand increase& Mia t!e

price elasticity( t!is #ould mean t!at t!e price of crude oil decreases( or t!at price increases are

limited& 'n 200=( t!e European Iommission assumed t!at if = of t!e EU transport fuel market

#ould consist of biofuels( t!is #ould lo#er t!e goba price of oil by around 1&8& !is #ould !a"e a

concomitant do#n#ard impact on a)ricultural commodity and food prices2&

2&? @ro#in) biofuel on abandoned cropland

!e EU !as more t!an enou)! land to produce food& Iontinuously a)ricultural land is taken out of

production( for economic reasons( and by setaside obli)ations& Still( t!e food and feed commodity

production increases&

'n 200>( t!e European Iommission reported t!at 4t!e main effect of EU biofuel consumption !as

been t!e reuse of recently abandoned a)ricultural land( or a reduced rate of land abandonment5 3&

Earlier( t!e Iommission estimated t!at by 2020( for e"ery million !ectares of EU land used for

biofuels feedstock production to 2080 in de"eloped re)ions( cropland use is e,pected to

decrease by a furt!er 80 million !ectares&

1 PB *Cet!erlands En"ironmental 6ssessment 6)ency+( 2010( !e contribution of byproducts to t!e sustainability of biofuels&

$2 %&ro'ean o""iion 200* o""iion taff woring ,oc&"ent acco"'any the iof&el 'rogre re'ort .% (2006) 1*21!3 European Iommission( 200>& Iommission staff #orkin) document& 6ccompanyin) document to t!e rene#able ener)y pro)ress report&

SEI*200>+ 803 final& 76-( 200>& @lobal a)riculture to 2080& /i)! e"er E,pert 7orum ; /o# to 7eed t!e 9orld in 2080&


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2&>

!e conseAuences of !i)! food prices for t!e poor are ambi)uous

Duc! of t!e analysis so far seeks to understand if and !o# biofuels !a"e increased food prices&

/o#e"er( understandin) t!e impact on food security needs some more steps&

/i)! food prices are often percei"ed as decreasin) food security& /o#e"er( as 'ISKL76- #rite( 4t!e

opposite episodes of depressed #orld prices( especially #!en prolon)ed( are also detrimental to food

security by slo#ly erodin) and displacin) ot!er#ise "iable domestic production5& !is results in

)reater national dependency on t!e #orld market in t!e lon)er term2&

6lso( a 2012 article in Science notes t!at 4t!e ar)uments put for#ard today( t!at high food prices

)enerally !urt t!e poor( are in contrast #it! t!ose put for#ard a fe# years a)o( t!at o( food prices

#ere !urtin) t!e poor5 13& Before t!e 4200


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3

Biofuels and local food security

3&1 ransmission of crop prices to food commodity prices

7luctuations in t!e ma%or food crop prices are not fully translated into t!e prices of o"erall food

commodities33 as can be seen from 7i)ure 8& Especially durin) t!e 200=200? price spike( )lobal food

prices and meat prices increased muc! less t!an crop prices&

*igure /+ Price in&ices 'or 'oo& commo&ities. meats an& cro(s+ >e(ro&uce& 'rom ;%DA33. base& on International

8onetary *un& Primary Commo&ity Price &ata"= *oo& Price In&e9. -e cro(s line re(resents t-e a)erage o' 5-eat.

rice. corn an& soybean (rices. meat is t-e a)erage o' bee'. (ork an& c-icken (rices+

? 'D7 Primary Iommodity Prices( accessed 6u)ust 2 2013&


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3&2

ransmission of )lobal to local food prices

ransmissions of fluctuations on t!e )lobal market to domestic and local markets are not

strai)!tfor#ard& !e le"el of inte)ration of a domestic market #it! t!e international market differs

per country& !e e,tent and timin) of t!e impact depend on se"eral factors:

• Structure of t!e markets( costs of infrastructure and marketin).

• 6)riculture and trade policy measures.

•

ocal currency "aluation.

• e"el of selfsufficiency.

• 6mount of product typically lost to #aste( spoila)e and t!eft.

•

Ke)ree of processin) of final consumption )oods&

/i)! #orld food commodity prices !ad limited s!ortterm impacts on food security in de"elopin)

countries33& !is is because !i)! domestic production in 2010( in particular in SubSa!aran 6frica( led

to adeAuate food supplies& 6lso( t!ere is often little or a la))ed price transmission from t!e

international market to local markets 4due to limited inte)ration in t!e )lobal marketplace( poor

market infrastructure( and subsidies pro"ided by t!ese )o"ernments5 33&

E"en if international fluctuations do not affect markets in t!e s!ort term( t!ey #ill indicate a )eneral

trend in t!e lon) term& /o#e"er( many spikes in domestic prices do not result from international

price fluctuations( but rat!er from domestic e"ents( especially #!ere domestic markets !a"e less

inte)ration #it! t!e international market&

76- 6D'S analysed 188 price series for 82 countries and found t!at domestic prices rose more t!an

#orld prices in about one t!ird of t!e series& ransmissions #ere bet#een 80100 in anot!er t!ird

of t!e series and belo# 80 in t!e remainin) t!ird part of t!e series>& 'n t!e ma%ority of analysed

cases( t!e price rises in local currency terms #ere lo#er t!an in US Kollar terms& !e a"era)e price

transmission rates are )i"en in able 3&

76- 6D'S notes t!at for many countries in 6frica( ot!er studies find t!at t!e mai$e price transmission

is usually "ery #eak( because t!e traded "olumes are small compared to t!e domestic supply&

/o#e"er( t!e analysis of t!e first price spike s!o#s an unusually !i)! price rise& 76- 6D'S su))estst!at t!ere may !a"e been problems #it! t!e domestic price data in some of t!e cases&

> 76- 6D'S 2011( En!ancin) market transparency ; Re"ie# of c!an)es in domestic cereal prices durin) t!e )lobal price spikes( 6)ricultural

Darket 'nformation System&


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able 3+ A)erage (rice transmission rates base& on ;%D (rices6"$+ *or e9am(le. a 1 ;%? c-ange global rice -ai A1

market (rices is translate& to a 0+#" ;%? c-ange in national markets+

*irst s(ike 200@ 200=6

Rice !ai 61 Auality

#!eat )rains =>

#!eat flour 138

Dai$e US2 yello# 10?

%econ& s(ike 2010 20116

#!eat )rains 82

#!eat flour =Dai$e US2 yello# 8


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t!at farmers !a"e poor access to tec!nolo)ies and in )eneral practice poor mana)ement of soil and

#ater resources& 6dditional factors increasin) s!ocks in domestic markets can be: poor

infrastructure( !i)! transport costs( absence of creditLinsurance markets and "arious policy and

)o"ernance failures&

Cot only bet#een countries or re)ions( but also bet#een different )roups in a country t!ere can be

different responses to !i)! food prices& /i)! prices can be beneficial for one )roup but ne)ati"e for

anot!er( dependin) on t!eir consumptionLproduction pattern and t!eir le"el of income& !is is caused

by t!e "arious dimensions underlyin) t!e concept of food affordability and security8=:

• 6"ailability of food is determined by domestic production( import capacity( e,istence of food

stocks and food aid.• 6ccess to food depends on le"els of po"erty( purc!asin) po#er of !ouse!olds( prices and t!e

e,istence of transport and market infrastructure as #ell as food distribution and stora)e systems.

•

Stability of supply and access may be affected by #eat!er( price fluctuations( !umaninduced

disasters and a "ariety of political and economic factors.

• Safe and !ealt!y food utili$ation depends on care and feedin)( food safety and Auality( access to

clean #ater( !ealt! and sanitation&

Urban populations are mostly ne)ati"ely affected by !i)! food prices( since t!ey are net consumers

and cannot profit from t!e !i)!er income created by !i)! food prices&

7or t!e rural population( t!ere are differences& !e rural population is di"erse( consistin) of lar)e

producers( small !olders( net consumers etc& Dany small!olders and a)ricultural labourers are net

purc!asers of food( as t!ey do not o#n sufficient land to produce enou)! food for t!eir families&

Empirical e"idence from a number of SubSa!aran 6frican countries s!o#s t!at a ma%ority of farmers

or rural !ouse!olds *dependin) on t!e sur"ey definition+ are not net food sellers& 7or t!e poorest(

!i)! food prices are most of t!e time ne)ati"e alt!ou)! t!e creation of labour in a)riculture mi)!t

compensate t!at partially81&

'n t!e lon)er term( !o#e"er( !i)! prices are beneficial since t!ey pro"ide opportunities and !i)!er

profitability for a)ricultural markets *#!ic! are( most of t!e time( also in de"elopin) rural re)ions+&

Doreo"er( biofuel production creates opportunities to )enerate income and as a boost to de"elopmentof a)riculture practicesLtec!nolo)ies81(8?&

Since it is e,pected t!at t!e "olatility of a)ricultural markets #ill not reduce in t!e s!ort term( it is

important to stren)t!en t!e position of small!olders and rural populations in t!ese price fluctuations

and c!an)in) markets& 6mon) t!ese su))estions are indications to reduce "olatility of t!e

a)ricultural market like81:

8= 76-( 200?( !e state of food and a)riculture ; Biofuels: prospects( risks and opportunities&8? 76-LBE7SI'( 2012( 'mpacts of bioener)y on food security @uidance for assessment and response&


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•

6ccess of smallscale farmers to better seeds( better a)ricultural inputs( better eAuipment and

kno#!o#.

• BetterLreliable and uptodate information on markets and prices.

• Irop insurance.

•

Set up of international food stocks #!ic! can absorb fluctuations in production better.

• Reduction of import barriers( trade distortin) measures and all forms of e,port subsidies.

• Reduction of #astes so as to increase production of feedstock&

7urt!ermore t!ey pro"ide ideas t!at #ould !elp small!olders to be more resilient( like impro"in) of

a)ricultural inno"ation systems and supportin) small!olders to de"elop and in"est tec!nolo)ies and

practices&

3&

'mpact on po"erty and !un)er

Ientral to t!e concern about biofuels and food prices( is t!at food price increases impact food

affordability and Auickly lead to reduced food intake or a s#itc! to#ards a c!eaper but less !ealt!y

diet( riskin) malnutrition and undernouris!ment&

6ccordin) to t!e 9orld Bank( currently about 1&2 billion people( or 21 of t!e )lobal population( li"e

on less t!an T1&28 a day8>& !e 76- estimates t!at ?


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6n opportunity for de"elopin) countries

&1 'n"estments in a)riculture are needed

6)riculture in de"elopin) countries( #!et!er t!ose be in postcolonial 6frica or postcommunist

Eastern Europe( is currently far from ac!ie"in) its full potential& !e countries t!at currently recei"e

most interest in a)ricultural in"estment( ac!ie"e less t!an 28 of t!e potential yield on currently

culti"ated areas


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9ork in t!e area of foodfuel syner)y by E'


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Ecofys 2013 Biofuels and Food Security