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News : EU Economy Last Updated: Apr 24, 2009 - 5:31:05 PM


European Commission says food price rises not all related to cost of ingredients; Biofuel production no effect on prices in EU
By Finfacts Team
Apr 30, 2008 - 6:13:24 AM

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The European Commission said on Tuesday that only about two-thirds of the rise in food prices in Europe can be attributed to increases in the cost of ingredients. The Commission also said that biofuel production has no effect on food prices in EU.

Mariann Fischer Boel, the Agriculture Commissioner published figures showing that the cost of many staples had gone up by more than the value of basic commodities used to make them. Bread increased 10% between February 2007 and 2008, while the almost doubling of the price of wheat should have led to only a 3% rise.

“Energy, transport and labour costs have risen. But it is possible that somewhere along the food chain someone may be doing well out of this. We are not drawing conclusions; we are just presenting facts,”the Commission said.

The price of cooking oils and fat rose 12% rather than the 8% accounted for by ingredients.

Milk and cheese increased by a third and eggs by 17% over the same period. That should have led to a 12% rise in supermarkets, but the increase was 15%.

Overall, prices that should have risen 5%, had climbed 7%.

The European Commission said biofuel production has "no effect" on European food prices.

In response to the claim that the Commission said there would be no effect on world food prices, a spokesman said: "No one has ever said that there is no effect."

"What we have said is that the growing of biofuels around the world is a factor in the food price debate," he added. "But we have said clearly that there is no effect in the European Union."

Some leading international food scientists Tuesday recommended halting the use of food-based biofuels, such as ethanol, saying it would cut corn prices by 20% during a world food crisis.

President Bush urged the opposite. He declared the United States should increase ethanol use because of national energy security and high gas prices.

The three senior scientists with an international research consortium pushing a biofuel moratorium said nations need to rethink programs that divert food such as corn and soybeans into fuel, given the burgeoning worldwide food crisis. The group, CGIAR, is a global network that uses science to fight hunger. It is funded by dozens of countries and private foundations.

If leading nations stopped biofuel use this year, it would lead to a price decline in corn by about 20% and wheat by about 10% from 2009-10, said Joachim von Braun. He heads the International Food Policy Research Institute in Washington, the policy arm of CGIAR. The United States is the biggest biofuel producer.

However, the International Energy Agency, the adviser to developed countries, opposes moves to curtail biofuel production even though its currently insignificant in global fuel supply terms. The IEA view is that oil supply is already very tight and scaling back on biofuel plans would make the situation worse.

Rising oil prices have boosted the price of fertilizer and this in turn is impacting food output in developing countries.

Up to 20% of us corn production currently goes to the biofuel industry and both the US and EU restrict imports of ethanol from Brazil.

A report from Vietnam, in the New York Times today, says that Truong Thi Nha stands just four and a half feet tall. Her three grown children tower over her, just as many young people in this village outside Hanoi dwarf their parents.

The biggest reason the children are so robust: fertilizer.

Ms. Nha, her face weathered beyond its 51 years, said her growth was stunted by a childhood of hunger and malnutrition. Just a few decades ago, crop yields here were far lower and diets much worse.

Then the widespread use of inexpensive chemical fertilizer, coupled with market reforms, helped power an agricultural explosion here that had already occurred in other parts of the world. Yields of rice and corn rose, and diets grew richer.

Now those gains are threatened in many countries by spot shortages and soaring prices for fertilizer, the most essential ingredient of modern agriculture.

Some kinds of fertilizer have nearly tripled in price in the last year, keeping farmers from buying all they need. That is one of many factors contributing to a rise in food prices that, according to the United Nations’ World Food Program, threatens to push tens of millions of poor people into malnutrition.

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