As I’ve posted before I oppose subsidies on corn or soy cultivation for use in ethanol or bio-diesel production and have for a long time because of their market-distorting effects. However, as I’ve also posted before I’m pretty skeptical that corn subsidies are a major factor in causing wheat and rice prices to rise and so far I haven’t seen anybody claim that’s the case. According to The Guardian, the World Bank has a report, yet to be published, that not only says that but says that subsidies on bio-fuels are more important than all of the other possible factors like drought, increased consumption, and other bad government policies put together:
Biofuels have forced global food prices up by 75% – far more than previously estimated – according to a confidential World Bank report obtained by the Guardian.
The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.
The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.
Actual quotes from the report included in The Guardian’s story are fairly sparse with no supportive material. Here they are:
“Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases.”
and
“Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” says the report.
It’s possible that our subsidies on yellow corn for ethanol production has lead to increased prices in white corn (the kind that people eat) and wheat but you can’t conclude that from anything in this article. Whatever decreases there have been here in white corn production are more credibly explained by subsidies paid to Mexican farmers for domestic production than they are to land formerly used for white corn production being converted to yellow corn production.
I suspect that a far stronger case can be made that EU subsidies on using food oils for the production of bio-diesel has a major impact on the world market for food oils but that doesn’t seem to be the main focus of the article.
Based on the article alone I’d conclude that futures speculation is a proximate cause of the price increases in rice and wheat rather than U. S. ethanol subsidies.
If you combine enough things and numbers that aren’t really related but which might appear to be, you can probably prove anything. How do you evaluate the credibility of an unpublished report? Or that the findings in the report are being reported fairly and accurately?
I don’t think you can and, until the report itself is published, if ever, we’ll just have to wait and see.
