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Have Biofuels Raised Food Prices By 75%?

The Guardian says they have a leaked report from the World Bank that biofuels are responsible for 75% of the recent rise in food prices:

Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

The study’s figures contrast sharply with the USDA’s assertion that biofuels only account for some 3% of the price hikes. But according to the Guardian’s description of the study, biofuels have distorted food markets by: 1) Diverting grain away from fuel; 2) Incentivizing farmers to devote land for biofuel production; and 3) Sparking financial speculation in grain markets. But though the report was finalized in April, the World Bank has yet to release the findings.

So why has the report been suppressed? The Guardian, citing unnamed “senior development sources,” says it was to avoid embarrassing Bush, an adamant supporter of biofuels and corn-based ethanol. Grist speculates that World Bank president Robert Zoellick--formerly a high-ranking member of the Bush administration--might have had a big hand in keeping the findings quiet.

But I’d also point out that, whatever his political loyalties, Zoellick has consistently opposed the kinds of market-distorting subsidies that have driven biofuel production in the United States. Even under Bush, Zoellick agreed to significant reductions in U.S. grain, rice, and soybeans subsidies during WTO talks, and he has made the development of free trade and open markets a marked priority during his tenure as Bank president. Given the outsized impact of escalating food prices on the world’s poor, for Zoellick to bury the report’s findings would be particularly outrageous.

At the same time, I’ll concede that it’d be a tricky time for the Bank to cast a harsh light on America’s own food and energy policies, given Zoellick’s plea last week for the G8 to open up their pocketbooks and help the starving.

--Suzy Khimm