World Bank: Biofuels Didn’t Cause Grain Price Booms

A new white paper from the World Bank’s Development Prospects Group concludes that biofuels were not the main reason for the spike in grain prices from 2006 to 2008.

While demand for ethanol was a factor, the authors of the report say that rising energy prices, speculation in the futures market and poor weather conditions in certain regions played equally important roles. Between 2000 and 2008, the price of food commodities doubled, according to the report.

“We conjecture that index fund activity (one type of ‘speculative’ activity among the many that the literature refers to) played a key role during the 2008 price spike. Biofuels played some role too, but much less than initially thought,” write the authors.

The biofuels industry has been commonly blamed for causing record highs in grain prices and food shortages in the developing world. This report looks at a variety of factors involved and shows that biofuels production – while certainly a factor – was only one among many.

Rather than blame one sector, the authors encourage stakeholders to evaluate the interconnected factors that contributed to the problem.

“What type of measures would be more pertinent to mitigate any undesired effects of price variability would depend on the better understanding of the factors that not only affect, but also potentially alter, long? term price trends,” write the authors.

You can read the report here.

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