High gas prices causing biofuel demand and food price crisis
Link to article #1 here. Link to article #2 here.
UN warns it cannot afford to feed the world
By Javier Blas and Jenny Wiggins in London
Financial Times
Published: July 15, 2007
Rising prices for food have led the United Nations programme fighting famine in Africa and other regions to warn that it can no longer afford to feed the 90m people it has helped for each of the past five years on its budget.
The World Food Programme feeds people in countries including Chad, Uganda and Ethiopia, but reaches a fraction of the 850m people it estimates suffers from hunger. It spent about $600m buying food in 2006. So far, the WFP has not cut its reach because of high commodities prices, but now says it could be forced to do so unless donor countries provide extra funds.
Josette Sheeran, WFP executive director, said in an interview with the Financial Times: “In a world where our contributions are holding fairly steady, this [cost increase] means we are able to reach far less people.”
She said policymakers were becoming more concerned about the impact of biofuel demand on food prices and how the world would continue to feed its expanding population.
The warning could re-ignite the debate on food versus fuel amid concerns biofuel production will sustain food inflation and hit the world’s poorest people.
The WFP said its purchasing costs had risen “almost 50 per cent in the last five years”. The UN organisation said the price it pays for maize had risen up to 120 per cent in the past sixth months in some countries.
Biofuel demand is soaking up grain production as is rising consumption in emerging countries for animal feed.
“We face the tightest agriculture markets in decades and, in same cases, on record,” Ms Sheeran said. Global wheat stocks have fallen to the lowest level in 25 years, according to the US Department of Agriculture.
Ms Sheeran added: “We are no longer in a surplus world.”
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July 16, 2007
Ice-cream makers frozen out as corn price rises
Suzy Jagger and Carl Mortished
The Times, London
What’s the connection between ethanol, the biofuel produced from corn, and a cherry vanilla ice-cream?
Answer: the first is responsible for pushing up the price of the other.
This month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol.
Christina Seid, whose family have been making ice-cream at the Chinatown Ice Cream Factory for 28 years, said yesterday that she expected to have to raise her prices, along with all competitors in the short term. “We are holding out as long as we can, but prices will rise,” Ms Seid said.
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Amy Green’s Ivanna Cone ice-cream emporium in Lincoln, Nebraska, has already raised its prices for a small cone to $3.50 before tax, up from $2.95 a few months ago. She also estimates that she is paying $150 more a week for the butterfat that she uses in her ice-cream.
The squeeze on ice-cream makers, chocolate manufacturers and pizza companies – all of whom use dairy produce as a raw material – is set to tighten as the price of a gallon of milk in the US – up 55 per cent in the past 12 months in some American states – is now the same as a gallon of petrol, with dairy prices accelerating faster than the cost of fuel.
Prices for dairy products have also risen because of increasing demand from China and the Middle East along with the drought in Australia, reduced subsidies in the European Union and the rocketing cost of corn.