food vs fuel copy

IMPACT ASSESSMENT OF

MASSIVE BIO FUEL

PRODUCTION ON FOOD

PRICE INDEX

YASIN KABIR

Overview Segment 1 Introduction

Aim

RQs

Methodology

Limitations

Segment 2 (Global perspective) Impact -in a global context

Urban-poor in LIFDC

Gender perspective

Segment 3m (Local perspective) Affects on USA local market

Brazil‟s role

Segment 4 Discussion

Conclusion

Introduction

• Bio fuel (bf) is liquid, solid, or gaseous fuels derived from renewable biological sources. (i.e ethanol). Crops are currently used i.e. sugar cane (Brazil), corn, maize (USA) to produce ethanol

• Recent rise in energy prices-tensions in OPEC, uncertainties in future availability and access to non-renewable resources have made bf a major issue in many countries‟ policy.

• As food grains is being converted for the production of bf ,it triggered rise in food price index worldwide

Aim

The aim of the study was to assess the impacts of mass scale bio-fuel crop production on food price indices (global perspective), information was also collected regarding the case of Brazil and USA in a local context.

RQs

What are the possible Impacts of using food crops as bio-fuel on food-grain price index?

Case study on the aforementioned issue (food grain price) in USA and Brazil.

How to reduce the impact on food grain price index of bf? Is there any ways to convert the bf „curse‟ to a „blessing‟ ?

Methodology Economical impacts ,case studies was assessed based on literature review

(articles, internet sources).Recommendations were made from author‟s own analysis

Segment 1

Introduction

Aim RQs

Methodology

Limitations

Segment 2

Impact -in a global context

Urban-poor in LIFDC

Gender perspective

Segment 3

Affects on USA local market Brazil’s role

Segment 4

Discussion

Conclusion

Limitations

Economical impacts were concerned, in terms of monetary value (price/unit over a period of time).

Affect of inflation, local country taxation, Federal Reserve‟s impacts, money laundering, international political effects, economical and financial terminologies, jargons or tools were not considered in this paper.

On the context of case studies, due to the scope, time and resource constraints, we conducted only a desktop study rather than a field study. The local commodity price shift was studied based on general knowledge and all financial hedging effects will be ignored.

Segment 1

Introduction

Aim RQs

Methodology

Limitations

Segment 2


Urban-poor in LIFDC

Gender perspective

Segment 3


Segment 4

Discussion

Conclusion

Segment 1 Introduction

Aim

RQs

Methodology Limitations

Segment 2


Urban-poor in LIFDC

Gender perspective

Segment 3

Affects on USA local market

Brazil’s role

Segment 4

Discussion

Conclusion

Gender Perspective

Source: Soaring food prices: facts, perspectives, impacts and actions required, high-level conference on world food

security: the challenges of Climate change and bio energy, FAO, Rome, 3 - 5 June 2008

Fig: Gender Bias in Poverty and Welfare Effects of Staple Food Price Increases

From figure 1

The FHH are with very few

exceptions are economically

weaker than that of male headed

households and the resultant is

with the food price hike they are

more susceptible to the negative

effect as they spend more on

food than the male counter parts

The table also indicates that

Ghana and Viet Nam holds a

share of more than 20% of the

entire family structure as FHH

Also seen from the table that,

except from Guatemala , in all

the countries FHH are more

susceptible to welfare losses

than the MHH

Segment 1

Introduction

Aim RQs

Methodology

Limitations

Segment 2


Urban-poor in LIFDC

Gender perspective

Segment 3


Segment 4

Discussion

Conclusion

Affects on USA local market

Source: Baier S, Clements M. et al March, 2009, Bio-fuel Impact on Crop and Food prices: Using an Interactive Spreadsheet

Figure: Corn , Livestock Poultry and Egg Prices 1998/99-2006/7

Figure: Corn prices and US ethanol Production, Jan. 2005- May 2008

Corn Price 1.8$

Ethanol production 9,000,000 of barrels Corn Price 5.5$

Ethanol production 18,000,000

of barrels

Brazil’s Role WB claimed in July 2008

”Brazil's sugar-based ethanol did not push food prices”

This WB report concluded that, though Brazil has been used sugar cane a large scale to produce ethanol, it has not raised worldwide sugar price.. The same year, OECD also published an economic assessment report and agreed on the same issue with WB

Luiz Inácio Lula da Silva blamed strongly to the US and European subsidies as well as gave a restriction of using maize as biofuel crop. The Brazilian President declared in different ocassions that they are not responsible for world higher food prices

A study, "the effects on bio fuels on grain prices" has been published by Brazilian research unit of Fundação Getúlio Vargas. The study asserted that huge ethanol production need lots of sugar cane cultivation land. But Brazilian sugar cane production has no contribution to the average grain prices

Segment 1

Introduction

Aim RQs

Methodology

Limitations

Segment 2


Urban-poor in LIFDC

Gender perspective

Segment 3


Segment 4

Discussion

Conclusion

Limits of biofules

First generation ◦ Most critizised

◦ Emits CO2 in the production stage

◦ Competes with food production

Second generation ◦ Expensive and complex process

◦ Less fertile soil

What are biofules?

What is biomass?

First generation biofules

Second generation biofules

Third generation biofules

Limits of biofules

Major producers

Food price inflation

Potentional risks of biofules

Impact on developing countries

Proposed actions

Potential benefits

Conclusion

Limits of biofules

Thrid generation

◦ All pros and cons not assessed

Life cycle assessment

New biofules are expensive

Difficult for developing countries

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion

Major producers

Brazil, USA, the member state of European Union

and several other countries are dominating the

production of biofuel.

Most of bio fuels were supported by government

incentives

More than 200 support proceeds were involved

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion


Bio fuel production pushed up maize price

“…the impact of current biofuel policies on world crop prices, largely

through increased demand for cereals and vegetable oils, is significant but

should not be overestimated.” (OECD)

Current biofuel support measures alone are estimated to increase

average wheat prices

Higher corn price lead to higher price in animal source foods.

The 2007-2008 world food crises are partly blamed on increased demand

of biofuels

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion

Enhance energy security

Environmental Impact

Benefits to smallholders

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion

Impacts on developing countries

Poor people more susceptible to the price hike

Aid agencies

Burning forests

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion

Proposed actions

Freeze on first generation biofuels

production

Non food crops for biofuel

Biofuel from food byproducts and co

products

Reduce farmland reserves and set asides

Sustainable production of biofuel

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion

Potential benefits

Brazil: the world‟s first sustainable biofuel

economy.

According to FAO: biofuel can make

small farmers offers of potential profit

and recommended small credit programs

to help the industry grow.

Local producers stand a better chance to

capture local market share

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion

Conclusion

First generation biofules land-demanding

Second generation expensive and emits

CO2

Third generation expensive

Developing countries suffer from higher

food prices because of first generation

biofuel but can not afford production of

newer biofules

What are biofules?

What is biomass?




Limits of biofules

Major producers




Proposed actions

Potential benefits

Conclusion