Washington DC - U.S. Secretary of State Condoleezza Rice has admitted that the increased production and use of biofuels has helped raise food prices around the world. In a speech given to a gathering of Peace Corps country directors, Rice said biofuels have caused "some effect" on food prices, but added that it was an "unintended consequence" of government policies.
Rice outlined the main reasons for rising food prices and blamed biofuels for just a small part of the problem. "We think that it is not a large part of the problem, but it in fact may be a part of the problem," she said.
Rice said the inability to distribute food to places like Sudan and the low Dollar exchange rate have contributed the most to higher prices. She also highlighted export controls and the "improving diets" of India and China as contributory factors. Yes, I’m scratching my head on that one too.
Corn prices, along with all other staple foods, have risen dramatically in the past few years - since fall 2006, a bushel of corn has risen from about $2.50 each to approximately $6.51. Almost all of US ethanol is made from corn and an estimated 25% of the entire US crop will be used for ethanol production this year.
The US government mandates that 9 billion gallons of ethanol be added to gasoline this year and that will increase to 15 billion gallons by 2015. Farmers and ethanol production plants receive a 51-cent per gallon tax credit for ethanol production. Interestingly enough some countries, like China, have banned using any food crop for biofuel conversion.
The World Bank agrees with Rice and recently released a report on rising food prices. "Increased bio-fuel production has contributed to the rise in food prices," said the report. You can read the World Bank report here.