Biofuels will have impact on food prices as industry scales

In California, research demonstrates that the rapid development of the biofuels sector will result in the industry having an increasingly powerful impact on food prices and food security, according to Rosamond Naylor at a symposium at Stanford University last week.

“The main part of this that I think is so significant is the use of mandates,” Naylor said. “Policies such as the United States’ Renewable Fuels Standard (RFS), which sets a national target of using 15 billion gallons of corn-based ethanol per year by 2015, have reshaped price and supply dynamics in both food and fuel markets. “

Because of the substitutability of basic food commodities, Naylor said, price volatility in the corn market has far-reaching consequences. “Prices of corn ripple through all of the world food economy markets…it affects the demand and supply of wheat and rice and soy, and other things,” she explained. And for poor households in the developing world, she said, “it has big income effects…when you’re spending 70 to 80 percent of your budget on food, you’re going to be hurt the most.”

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