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No Correlation Between Ethanol and Food Prices

  • Wednesday, 07 June 2017 11:55

Late last month, the Global Renewable Fuel Alliance (GRFA) released new data that further confirms ethanol production does not raise fuel prices.

 The GRFA released a data chart that presents world fuel production since 2008 in comparison to the UN FAO’s Food Price Index (FPI), using the latest production data from F.O. Licht’s 2017 forecasts. The complied data clearly shows that ethanol production has not influenced world food prices.


GRFA said: “The FPI’s steady and significant drop to 161.5 points in 2016 since peaking at 229.9 points in 2011 has paralleled the drop in annual oil prices over the same period. West Texas Intermediate (WTI) annual figures show that oil prices have dropped from $94.88 (USD) in 2011 to $43.15 (USD) in 2016.

“By contrast, this decline in food prices has coincided with a period of record ethanol production expansion, rising from 87 billion litres in 2011 to 98.5 billion litres in 2016, a 16 percent increase over this period. This disparity clearly demonstrates that increased ethanol production does not drive food prices.”

A 16 percent increase in global biofuel production compared to a 30 percent decrease in global food prices. If anything, the data points to an opposite effect of decreasing food prices. 

Last year, GRFA released similar findings: “These multi-year downturns in the food price index have occurred during a period of sustained declines in the price of crude. More recently, crude prices have been steadily recovering since January 2016 and have been closely mirrored by incremental increases in the food price index.”

“These latest findings are consistent with the 2013 World Bank publication, ‘Long-Term Drivers of Food Prices,’ that concluded that almost two thirds of food price increases are caused by rising oil prices. The report states that between 1997-2012 the price of crude oil caused maize and wheat prices to increase by 52 percent and 64 percent, respectively.”

International institutions such as the International Energy Agency, the United Nations FAO and the World Bank have long recognized the correlation between oil prices and food prices. These findings continue to shed light on the misinformation that incorrectly blames biofuels for food insecurity.

Accordingly, UN FAO Director-General Jose Graziano da Silva has recognized biofuels as a key part of the global agriculture complex with social, agricultural and environmental benefits and outlined the potential for agriculture to accommodate mutually supportive food and biofuel production.