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of agricultural commodities on the international markets. Estimates vary about the percentage of
price increases which can be explained by the rise in demand for cropland and feed resulting
from recent initiatives, particularly in the United States and in the European Union, aiming at
encouraging the reliance on agrofuels as an alternative to fossil fuels.65 But there is a consensus
that these initiatives have has a significant impact. The IMF estimated that the increased demand
for biofuels accounted for 70 per cent of the increase in maize prices and 40 per cent of the
increase in soybean prices.66 A recent study on the factors having led to the increase in
internationally traded food prices from January 2002 to June 2008 concludes that “the most
important” of these was the large increase in biofuels production from grains and oilseeds in the
U.S. and EU. This study estimates that, while energy prices and related increases in fertilizer
prices as well as the weak dollar could explain 25-30 per cent of the increase in food
commodities prices, the remaining 70-75 per cent could be attributed to agrofuels production:
Without these increases [in the production of feed for fuel], global wheat and maize stocks
would not have declined appreciably and price increases due to other factors would have
been moderate. Land use changes in wheat exporting countries in response to increased
plantings of oilseeds for biodiesel production limited expansion of wheat production that
could have otherwise prevented the large declines in global wheat stocks and the resulting
rise in wheat prices. The rapid rise in oilseed prices was caused mostly by demand for
biodiesel production in response to incentives provided by policy changes in the EU
beginning in 2001 and in the U.S. beginning in 2004. The large increase in rice prices was
largely a response to the increase in wheat prices rather than to changes in rice production
or stocks, and was thus indirectly related to the increase in biofuels. Recent export bans on
grains and speculative activity would probably not have occurred without the large price
increases due to biofuels production because they were largely responses to rising prices.67
USD 0.54 per gallon, as well as a biodiesel blenders tax credit USD 1.00 per gallon. The U.S.
mandated 7.5 billion gallons of renewable fuels by 2012 in its 2005 legislation and raised the
mandate to 15 billion gallons of ethanol from conventional sources (maize) by 2022
and 1.0 billion gallons of biodiesel by 2012 in the 2007 Energy Independence and Security Act.
65
An IFPRI study suggests price increases of between 16 and 43 per cent at best and between 30
and 76 per cent at worst, depending upon the commodity (Mark Rosegrant and others, “Biofuels
and the global food balance”, in Bioenergy and Agriculture: Promises and Challenges,
Peter Hazell and P. K. Pachauri, eds. (IFPRI, 2006); see also Marc Cohen and others, Impact of
Climate Change and Bioenergy on Nutrition, IFPRI and FAO, 2008). Others consider that in the
medium-term, when markets will be operating well, the impact on prices will be lower,
averaging 5 per cent for most crops, although with significantly higher increases for certain
feedstock crops like oilseeds, maize and sugar cane (The Gallagher Review of the indirect effects
of biofuels production, The Renewable Fuels Agency, July 2008, at 57-58).
66
John Lipsky, First Deputy Managing Director, IMF, Commodity Prices and Global Inflation,
Remarks At the Council on Foreign Relations, New York City, May 8, 2008.
67
Donald Mitchell, A Note on Rising Food Prices, The World Bank, Policy Research
Working Paper No. 4682, July 2008, at 16-17.
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