The GRFA is urging ministers to examine the impact of global energy prices on food price volatility particularly in light of the recent run up in crude prices. “It is imperative that the G20’s Agriculture Ministers use this first meeting to recognize that there is a direct and strong correlation between the price of crude oil and the price of food,” stated Bliss Baker, spokesperson for the GRFA.
A recent draft document produced for today’s G20 Agriculture Ministers meeting made several constructive recommendations regarding potential responses to food price volatility; however, their recommendations to eliminate biofuel support policies would almost certainly lead to higher fuel prices and therefore increased food price volatility.
The graph below shows the clear correlation between the price of crude oil and the UN Food and Agriculture Organization’s Food Price Index.
Source: IMF – Primary Commodity Prices
According to Iowa State University, biofuels indirectly exert downward pressure on food prices by reducing energy prices. A May 2011 study by their Center for Agricultural and Rural Development found that the growth in ethanol production reduced US gasoline prices by an average of $0.25, or 16%, over the entire decade of 2000-2010.
In addition, recent research suggests high oil prices play a significant role in food price inflation and volatility. A study by Texas A&M found that “the underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil.”
“We are urging the G20 Agricultural Ministers to focus on the core issues of food price volatility, chief among them – the high cost of energy,” said Mr. Baker.
The Global Renewable Fuels Alliance is a non-profit organisation dedicated to promoting biofuel friendly policies internationally. Alliance members represent over 65% of the global biofuels production from 44 countries. Through the development of new technologies and best practices, the Alliance members are committed to producing renewable fuels with the smallest possible footprint.
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