The href=”http://www.fao.org/fileadmin/templates/est/Volatility/Interagency_Report_to_the_G20_on_Food_Price_Volatility.pdf”
target=”_blank”>report, released on Friday and produced at the
request of leaders of G20 countries, investigates ways of
mitigating volatility in global food prices and calls on G20
governments to ditch policies that encourage biofuel production or
use, such as subsidies or energy targets.

“As long as governments impose mandates (obligations to blend
fixed proportions of biofuels with fossil fuels, or binding
targets for shares of biofuels in energy use), biofuel production
will aggravate the price inelasticity of demand that
contributes to volatility in agricultural prices,” the report
says.

Biofuel demand boosted sugar cane prices

While population growth, increased urbanisation and rising
incomes in emerging economies are expected to play key roles in
increasing world demand for food, the use of land for biofuels
production is forecast to exert “considerable upward pressure” on
future food prices, the report says. Between 2007-09, biofuels
accounted for, on average, 20% of demand for sugar cane crops
globally, 9% for vegetable oil and coarse grains, and 4% for sugar
beet crops, it adds.

If the price for biofuels crops exceeds that in the food market,
there is a higher risk that land will be diverted for biofuel
production, putting further pressure on food prices. Rising oil
prices, which make biofuels a more attractive option, will further
exacerbate the problem - as will policies that support biofuels,
the report argues.

“Subsidies to first-generation biofuel production lower biofuel
production costs and therefore increase the dependence of crop
prices on the price of oil,” the report says. “Such policies
warrant reconsideration.”

In addition to urging G20 nations to scrap biofuels subsidies
and mandates, the report recommends that governments:

• open international markets to promote the production of
  renewable fuels and feed stocks;



• speed up research into ways to improve energy security and
  lower carbon emissions; and



• encourage greater energy efficiency in agriculture.

If governments retain subsidies, they should at least have a
contingency plan which allows for support to be temporarily
adjusted “when global markets are under pressure and food supplies
are endangered”, the report recommends.

Report points to food prices and climate
risk

While the report stops short of making a direct link
between climate change and agricultural pricing volatility, it says
climatic factors, such as drought and fires, have “indisputably
contributed” to rising food prices, and adds that experts “concur
broadly” that climate change will have a negative effect on some
food-growing regions.

“Clearly, climate change will provoke some adjustment of
production patterns around the world, as well as increased
risks of local or regional supply problems that could add to future
volatility,” the report says.

The report calls for greater investment in R&D to enhance
agricultural resilience to climate change and resource scarcity,
and urges G20 governments to support the scaling up of fiscal risk
management services, such as the creation of advisory services to
help governments evaluate exposure to climate change and mitigate
its financial risks.

The report was produced by: the UN’s Food and Agriculture
Organization, the UN Conference on Trade and Development, the
UN High-level Task Force on the Food Security Crisis, the UN World
Food Programme, the World Bank, the World Trade Organization, the
International Fund for Agricultural Development, the International
Monetary Fund, the OECD, and the International Food Policy Research
Institute.