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US corn ethanol cost poor nations $6.6 bln - study

Source: Thomson Reuters Foundation - Thu, 11 Oct 2012 18:07 GMT
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p>LONDON (AlertNet) - Growing use of U.S.-produced corn for biofuel has added $6.6 billion to the food import bills of developing countries over the past six years, highlighting the need to rethink energy policies that are making food more expensive for poor people, says new research.

The amount of U.S. maize that goes into ethanol equals around 15 percent of global corn production, and in recent years this has contributed to rising food prices around the world, says the study from Tufts University in Massachusetts.

"Higher corn prices have had a direct impact on the food-import bills of developing countries, many of which have become heavily dependent on outside sources of basic food commodities in the last 25 years," the paper explains.

It cites a recent survey by the National Academy of Sciences estimating that biofuels expansion globally accounted for 20-40 percent of international food price surges in 2007-2008. The price hikes led to riots in many poorer nations.

This year, a severe drought in the American Midwest has reduced corn harvests, boosting prices again and triggering calls for the U.S. government to relax its mandate for boosting biofuel use, known as the Renewable Fuel Standard (RFS). Ethanol now makes up nearly 10 percent of U.S. gasoline sales.

The paper calculates that, from 2006 to 2011, ethanol-related corn price increases cost all corn-importing countries $11.6 billion. Developing nations bore around 57 percent of the burden, with Mexico, Egypt, Colombia, Iran and Malaysia paying the most.

The study makes a link between high ethanol-related import costs in North Africa - $1.4 billion over the six-year period - and unrest in that region. It notes that costs were also high in other import-dependent countries experiencing social unrest – Syria ($242 million), Iran ($492 million) and Yemen ($58 million).

"This simply highlights the importance of food price stability to political stability, and the potential contribution of ethanol-related price increases to political instability," it adds.


Central America is another region that has paid dearly for its growing reliance on U.S. corn imports, the study says. Scaled for population, the per-capita impacts were nearly as high as Mexico's, with $368 million in total ethanol-related costs.

The hardest-hit was Guatemala, where costs reached $91 million, including $28 million in the 2010-11 trade year alone. The latter figure is six times the level of U.S. agricultural aid to Guatemala and nearly as much as U.S. food aid that year, the study notes.

"If the U.S. ethanol mandate is effectively taking back the value of U.S. food and agricultural assistance to developing countries, then U.S. biofuels policies are potentially undermining our own aid goals," the paper concludes.

It also looks at the impact of higher international corn prices on Uganda, citing data that shows a strong correlation between these and domestic retail prices, contributing to food insecurity among the urban poor.

"By our estimates, U.S. corn ethanol expansion since 2004 has boosted (Ugandan) maize prices in recent years by about 20 percent, a premium Uganda’s urban poor are ill equipped to absorb," it says.

The charity ActionAid, which has issued its own report this week based on the Tufts research, urged G20 governments meeting at a food summit next week to make international commitments to end the push for ethanol-based fuels. It said the United States should reduce its ethanol mandate, and stop diverting food to fuel when crops are scarce.

“The summer's drought clearly illustrates we cannot consistently keep up with the corn demand for food, feed and fuel, and those in poverty pay the ultimate price,” Kristin Sundell, ActionAid USA policy analyst, said in a statement.  

Last month, the European Commission announced a major shift in biofuel policy, saying it plans to limit crop-based biofuels to 5 percent of transport fuel.

Timothy Wise, the author of the study and policy research director at Tufts University’s Global Development and Environment Institute, said that amid "the third serious food price spike in five years", world leaders had still not learned the lessons from the first two, nor taken action to address the causes.

"By restricting the expansion of corn ethanol and global biofuels, global leaders can calm international markets, slow speculation, and send an unmistakable signal that they place food before fuel and people before cars," he added.

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