What World Bank Report Says – and Doesn’t Say

The World Bank report released earlier this month has gotten quite a bit of media attention lately, especially regarding its concern about biofuels production.

During a press conference with President Bush Tuesday, a reporter said, “The World Bank says about 85 percent of the increase in corn price since 2002 is due to biofuel — increased demand for biofuels.”

Near as I can tell, the World Bank report does not say that. What it does say is, “Only a relatively small share of the increase in food production prices (around 15%) is due directly to higher energy and fertilizer costs.” It does not attribute a percentage to biofuels production.

What it does say is, “Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for biofuels production in the U.S., while existing stocks were depleted by an increase in global consumption for other uses.” What that means is that, as Agriculture Secretary Ed Schafer told farm broadcasters Tuesday, “Only about 25 percent of the corn crop goes into ethanol today and we have been able to stay ahead of that by yield increases.” In other words, our yield increases in the United States have offset the increased demand for corn to make ethanol.

It’s also critical to note that in the World Bank report graph showing expected world food price percentage increases for 2008 compared to 2004 – the biggest increases are in wheat (119%) and rice (101%) – not corn. Rice seems to be a major focus of the world food crisis, yet there appears to be no direct connection between the price of rice and biofuels production.

The World Bank does say that increased bio-fuel production has contributed to the rise in food prices. No one denies that. No doubt that increased corn prices have had an effect on increasing food prices. However, no one seems to know exactly how much. It is nearly impossible to sort out the impact of so many different factors coming to bear on food prices.

In announcing a food crisis task force on Tuesday, United Nations Secretary-General Ban Ki-moon blamed the escalating prices on a range of factors — high oil prices, growing demand, bad trade policies, bad weather, panic buying and speculation, as well as, “the new craze of biofuels derived from food products.”

“In addition to increasing food prices, we see at the same time farmers in developing countries planting less, producing less, due to the escalating cost of fertilizer and energy,” he said. “We must make every effort to support those farmers so that in the coming year we do not see even more severe food shortages.”

That is key to the whole food crisis right there. Supporting farmers in other countries so they can produce their own food. President Bush noted in his press conference today that the US is “deeply concerned about people who don’t have food abroad” and will continue to be generous in food donations. He also suggested a “creative policy – is if we would buy food from local farmers as a way to help deal with scarcity, but also as a way to put in place an infrastructure so that nations can be self-sustaining and self-supporting.”