Executive Summary
The use of corn feedstock in ethanol has contributed to demand-side increases in the price of corn in the last decade. The impact of crop displacement and higher livestock feed prices creates ripple effects throughout the agriculture market that cause general food inflation – the extent of this effect is still fiercely debated.
The impact of biofuel on food prices is projected to contribute significantly to malnourishment in the developing world, as the poor pay a higher proportion of their income on food.
The use of distillers grains has only a marginal impact in containing price increases in proteins. It does not solve the “food versus fuel” problem.
Biofuel production is not the only cause of rising food prices—the rising price of oil in particular causes farm inputs to increase. Other possible causes of food price increases, such as dietary change in China and India, have less merit.
Introduction
Biofuel such as ethanol and biodiesel are key components of clean energy strategies in Canada, the United States and Europe. Advocates point to its cleaner life-cycle emissions, which could reduce carbon emissions in the transportation sector in particular. Producing biofuel is expensive and to be viable it requires heavy mandates, government subsidization and high oil prices. This paper is not concerned with the environmental benefit of biofuel but with the effect of resource displacement. By drawing on feedstock, biofuel production can put a strain on the food supply by increasing crop demand and by displacing acres of other crops in order to grow more feedstock.
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