The United Nations (UN) food agency, the Rome-based FAO, has stepped up pressure on the United States to change its biofuel policies because of the danger of a world food crisis.
The UN Food and Agriculture Organisation was arguing the importance of growing crops for food over their use for fuel.
Reuters Newsagency reports that has fuelled a six per cent surge in the UN FAO’s July food price index.
The FAO’s Director-General Jose Graziano Da Silva wrote in the London Financial Times that competition for a US corn crop that has been ravaged by the worst drought in 56 years was only going to intensify.
“Much of the reduced crop will be claimed by biofuel production in line with US federal mandates, leaving even less for food and feed markets,” he wrote in an editorial.
“An immediate, temporary suspension of that mandate would give some respite to the market and allow more of the crop to be channelled towards food and feed uses,” he said in the high profile yet indirect message to Washington.
Reuters points out that under the five-year-old Renewable Fuels Standard (RFS), US fuel companies are required to ensure that nine per cent of their petrol pools are made up of ethanol this year.
That means converting some 40 per cent of the corn crop into the biofuel.
The US Department of Agriculture has just slashed its estimates for the size of the corn crop by more than expected, sending corn futures prices, already up 60 per cent since June, to a fresh all-time high.
Reuters says a mix of high oil prices, growing use of biofuels, speculation on commodity markets and export restrictions pushed up prices of food in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.
David Hallam, director of the FAO’s trade and markets division, told Reuters that biofuels policies needed to become more flexible to help prevent new food crises developing.
“One idea is you have some kind of price trigger so that as maize prices rise then the mandates adjust,” he said, adding that the FAO wanted to reopen debate on biofuels policies.
The FAO has joined a growing and diverse chorus calling for an unprecedented waiver or suspension of the RFS.
Livestock producers, which are forced to bid against ethanol producers to secure costlier grain for feed, were first to ask for relief.
However, the EPA has yet to receive an official petition for a waiver, which can only come from a fuel blender or a state governor, according to the legislation.
FAO officials have warned of the potential for a food crisis to develop if countries resort to the kind of export restraints and panic buying that aggravated price surges in 2007/08.
Charity Oxfam has warned that rising food prices could drag millions of people around the world into conditions of hunger and malnourishment, in addition to nearly one billion who are already too poor to feed themselves.
While the RFS program faces growing criticism, it also has strong support from Farm Belt politicians in an election year and has been a core part of President Obama’s energy plan.
Reuters says waiving the mandate could have several unintended effects, such as dampening investment in cellulosic and other advanced biofuels that could cut dependence on food crops for making fuel.
It could also damage the market for dried distillers’ grains, an ethanol by-product sold as a livestock feed.