Biofuel boom to push up food costs
If every country meets its target for biofuels, what you save at the gas station may go right back at the grocer’s.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: If every country meets its target for biofuels, what you save at the gas station may go right back at the grocer’s.
Higher production of ethanol and biodiesel will add straight to the prices of cooking oil, sugar, wheat, corn, meat and butter.
That means everything from hamburgers, colas, ice creams and pizza to basic atta would feel the squeeze. As fats, sugar, and starch are the prime sources of human energy and the chief building blocks of the global fast food revolution, biofuels will make food expensive.
In India, once the 10% blending programme takes off, price of meat, milk, industrial alcohol and potable liquor would be affected as more molasses get diverted to ethanol. Molasses is an important cattlefeed, and higher prices would impact both dairy and meat.
The government has announced plans to implement the second stage of the ethanol programme, which aims to supply ethanol-blended gasoline across the country from the ‘06-07 sugar marketing year. This would require about 600m liters of ethanol to blend with gasoline at 5%.
In the third stage, the plan is to increase the ethanol blending ratio from 5% to 10%. Globally, prices of starchy and sucrose crops will rise as the production of biofuels gathers pace due to higher demand.
According to estimates by OECD, this is particularly the case for vegetable oils, where the stronger EU imports will push up world prices to $697/tonne by ‘14, 15% higher than without an increase in biofuel production.
The extra demand for sugar in the EU would lead to a 60% jump if biofuels catch fire. Similarly, world grain prices would be somewhat higher, due to the additional demand from ethanol production in the EU and in Canada. “World wheat prices would rise to $167/tonne, more than 4% higher than under the constant biofuel production scenario,” the OECD has said.
Most international meat prices would be somewhat higher than without growth in biofuels production — and more for pork than for beef. Implications are more significant for dairy markets, where butter prices tend to increase by up to 3%.
“In contrast to the meat markets, however, this is not predominantly caused by higher feed prices. Instead, the higher prices for vegetable oil raise demand for butter. That in turn increases SMP output, and in consequence, SMP prices fall by up to 0.7% relative to the no-change scenario,” OECD has pointed out.
Higher production of ethanol and biodiesel will add straight to the prices of cooking oil, sugar, wheat, corn, meat and butter.
That means everything from hamburgers, colas, ice creams and pizza to basic atta would feel the squeeze. As fats, sugar, and starch are the prime sources of human energy and the chief building blocks of the global fast food revolution, biofuels will make food expensive.
In India, once the 10% blending programme takes off, price of meat, milk, industrial alcohol and potable liquor would be affected as more molasses get diverted to ethanol. Molasses is an important cattlefeed, and higher prices would impact both dairy and meat.
The government has announced plans to implement the second stage of the ethanol programme, which aims to supply ethanol-blended gasoline across the country from the ‘06-07 sugar marketing year. This would require about 600m liters of ethanol to blend with gasoline at 5%.
In the third stage, the plan is to increase the ethanol blending ratio from 5% to 10%. Globally, prices of starchy and sucrose crops will rise as the production of biofuels gathers pace due to higher demand.
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According to estimates by OECD, this is particularly the case for vegetable oils, where the stronger EU imports will push up world prices to $697/tonne by ‘14, 15% higher than without an increase in biofuel production.
The extra demand for sugar in the EU would lead to a 60% jump if biofuels catch fire. Similarly, world grain prices would be somewhat higher, due to the additional demand from ethanol production in the EU and in Canada. “World wheat prices would rise to $167/tonne, more than 4% higher than under the constant biofuel production scenario,” the OECD has said.
Most international meat prices would be somewhat higher than without growth in biofuels production — and more for pork than for beef. Implications are more significant for dairy markets, where butter prices tend to increase by up to 3%.
“In contrast to the meat markets, however, this is not predominantly caused by higher feed prices. Instead, the higher prices for vegetable oil raise demand for butter. That in turn increases SMP output, and in consequence, SMP prices fall by up to 0.7% relative to the no-change scenario,” OECD has pointed out.
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