UK: July 7, 2008


LONDON - Biofuels have forced global food prices up by 75 percent -- far more than previously estimated -- according to a confidential World Bank report published in a British newspaper on Friday.


The assessment is based on a detailed analysis by Don Mitchell, an internationally respected economist at the Washington-based global financial body, the Guardian said.

The figure contradicts US government estimates that plant-derived fuels have contributed less than 3 percent to food-price increases, the newspaper said.

It will add to pressure on governments in Washington and Europe, which have turned to biofuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.

Due to Friday's Independence Day holiday in the United States the Guardian report could not immediately be confirmed.

World Bank President Robert Zoellick has said biofuels are a "significant contributor" to the increase in food prices.

Recently, he wrote in the Financial Times that the use of corn for ethanol by the United States had consumed more than 75 percent of global corn production over the past three years, and called on the United States and Europe to ease subsidies and tariffs on biofuels derived from corn and oilseeds.

"The use of corn for ethanol has consumed more than 75 percent of the increase in global corn production over the past three years," he wrote. "Policymakers should consider 'safety valves' that ease these policies when prices are high," he wrote.

The Guardian said senior development sources believed the report, completed in April, had not been published to avoid embarrassing President George W. Bush. "It would put the World Bank in a political hot-spot with the White House," said one source.


FOOD RIOTS

Leaders of the G8 leading industrial countries meet next week in Japan, where they will discuss the food crisis and come under intense lobbying from campaigners calling for a moratorium on the use of plant-derived fuels.

Rising food prices have pushed 100 million people worldwide below the poverty line, according to the World Bank, and have sparked riots from Bangladesh to Egypt.

Bush has linked higher food prices to higher demand from India and China, but the World Bank study said: "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases."

Even successive droughts in Australia have had a marginal impact. Instead, the report said the EU and US drive for biofuels has had the biggest impact on food supply and prices.

"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," the report said.

The basket of food prices examined in the study rose by 140 percent between 2002 and February 2008. The report estimated that higher energy and fertilizer prices accounted for an increase of only 15 percent, while biofuels have been responsible for a 75 percent jump over that period.

It said production of biofuels had distorted food markets by diverting grain away from food for fuel, by encouraging farmers to set land aside for biofuel and by sparking speculation in grains, driving prices up higher. (Additional reporting by Lesley Wroughton in Washington) (Editing by Giles Elgood and Todd Eastham)


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