Global grain prices to rise 3% in wake of biofuels expansion: World Bank

In Washington, the World Bank says biofuel expansion means global prices for corn and other major grains could rise by as much as 3% and the price of sugar by 8%, according to its new internal research, which is based on a simulation model covering 25 countries or regions through 2020.

Using a global economic model, it simulates how the global expansion of biofuel production would affect the world’s economic activities, environment and social welfare. The analysis addresses in detail key factors such as the cost of biofuels, changes in land use and competition between biofuels and food production. The results are presented in comparison to a scenario without those mandates, assuming the current pace continues in economic development, population growth and biofuel development.

There are some caveats. The research assumes countries will meet all of their biofuel targets, which would require significant reshuffling of land use, capital and labor.