Food First ...
Food and energy prices are increasingly linked in ways that extend beyond the simple pass-through of input costs to agricultural production. Both energy and agricultural sectors face huge challenges in meeting future demand and mitigating price volatility. Biofuel policies are not currently aligned with food security goals, but ultimately food comes first in the hierarchy of human needs.
OECD INFLATION HIT 3.2% in May, with two elements again outstripping the all items index – food and energy. The former was up 3.9%, while the latter jumped 14.2%. In the euro area, the US and the UK, inflation is running well above central bank targets, yet there is little appetite to use central banks (perhaps former) tool of choice – interest rates – to curb these increases; not, at least, while the economic recovery remains so fragile and debt levels so high. In Russia, Brazil and China food
Use of Agricultural Feedstocks For Biofuels (Mt) Average 2008-2011 2020
Wheat Coarse Grains
Production Biofuels use % share
Production Biofuels use % share
Vegetable Oils Production Biofuels use % share
inflation exceeded 10% between January 2010 and 2011, a significant acceleration from the previous year. In China, the risk is not of recession, but overheating. Chinese inflation hit a three-year high of 6.4% in June. Within that some food stuff prices have risen by as much as 65%. Food price inflation overall is running at 14.4%. China’s leaders have singled out inflation control as a primary policy goal and warned of the social consequences of runaway price increases.
Sugar Beet Sugar Cane
New Links Food and energy prices are increasingly linked. Not just in
the traditional sense of the pass-through that occurs via energy related input costs for agricultural production, such as fuel and fertilizer, but in terms of the use of agricultural output for biofuels and biomass. Livestock production in particular competes with biofuels for feedstock, but the competition increasingly extends to other scarce resources such as land and water – for example shale gas water consumption – which impacts agricultural commodities that have little direct linkage with biofuel production. According to the FAO-OECD Agricultural Outlook 2011, “given
Production Biofuels use % share
Production Biofuels use % share
674 5.7
0.85
1121.6 123.7 11.03 137.7 18.4
13.36 221 17
7.69 1627 340
20.90
745.7 14.9 2.00
1320.7 166.2 12.58 179.5 26.8
14.93 244 30
12.30 2109 670
31.77 Source: FAO-OECD Agricultural Outlook 2011
increasingly industrialized and thus more dependent on petroleum-based products. Increased trade between regions means more dependence on fuel for transport. At the same time, productivity
growth in agriculture is slowing. Good quality agricultural land is being lost to urbanization. The main areas of additional land availability
... the relationship between energy prices and the costs of agricultural production is becoming closer
the prospects of higher oil prices, the value of feedstock crops in the energy market may exceed their value in the food, feed or fiber markets, putting increased pressure on commodity prices as well as increasing the link with energy markets.” The FAO- OECD says the relationship between energy prices and the costs of agricultural production is becoming closer. Agriculture is
are in lower productivity zones. As agriculture moves into more marginal areas, there is a greater chance of production shortfalls and price volatility. Overall, the FAO- OECD report sees food price inflation – unlike in the preceding decade – as
September 2011 57 By Ross McCracken
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