Sunday, June 01, 2008

OECD, FAO:Food price to raise on unchecked biofuel push

By Hwee Hwee Tan
Filed from Singapore 5/30/2008 11:50:44 AM GMT

INTERNATIONAL: OECD and UN Food and Agriculture Organisation (FAO) have urged checks on the global biofuel push to manage the increase in global food prices. In a joint report released earlier, OECD and UN FAO said biofuel will be the largest source of new demand for agriculture commodities contributing to an increase in food prices in the next few decades.

An expanding global biofuel market will compromise food production among exporting countries, along with an increase use of food crops such as palm oil in Indonesia and Malaysia and soybean oil in Brazil to feed biofuel plants and the use of arable land to cultivate biofuel feedstocks rather than food crops, the joint report said.

However, the report also noted how near record prices for agriculture commodities have checked the biofuel expansion in most parts of the world, despite strong public support and increasing fossil fuel prices.

A notable exception is the Brazil's ethanol industry, which benefited from lower world sugar prices backed by a large global sugar surplus, according to the report.

The world's ethanol markets may also benefit from a move by sugar producing countries to use molasses, a by-product from sugar refining process, rather than raw sugar cane juice. These fledging fuel ethanol programmes may also stimulate further growth in cane and sugar output, OECD and FAO said.

The report suggested some policy shifts to check biofuel's influence on world food prices, including reducing energy demand and greenhouse gas emissions, promoting freer trade in biofuels and accelerating the introduction of non-food second generation production technologies.
The report, OECD-FAO Agriculture Outlook 2008 - 2017, is published ahead of a food crisis summit in Rome on June 3 to 5. A copy of the report is available at the OECD website.