Food Security with Biofuels? An FAO Perspective Seminar on Impact of Bio Fuel Crops on the Poor and the Agriculture Sector Common Fund for Commodities (CFC) Kuala Lumpur, 26 November 2007 - PowerPoint PPT Presentation


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Food Security with Biofuels? An FAO Perspective Seminar on Impact of Bio Fuel Crops on the Poor and the Agriculture Sector Common Fund for Commodities (CFC) Kuala Lumpur, 26 November 2007


... (2007) Source: OECD-FAO Agricultural Outlook 2007-2016 Wheat Coarse Grains Source: OECD-FAO Agricultural Outlook 2007-2016 A threat to food security? – PowerPoint PPT presentation

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Title: Food Security with Biofuels? An FAO Perspective Seminar on Impact of Bio Fuel Crops on the Poor and the Agriculture Sector Common Fund for Commodities (CFC) Kuala Lumpur, 26 November 2007

Food Security with Biofuels?An FAO Perspective
Seminar on Impact of Bio Fuel Crops on the Poor
and the Agriculture SectorCommon Fund for
Commodities (CFC) Kuala Lumpur, 26 November 2007
A. Abbassian Secretary of the Intergovernmental
Group on Grains Food and Agriculture Organization
of the United Nations - FAO
Presentation Overview
  1. Why biofuels? Why now?
  2. Bio-energy and biofuels now and after
  3. Do biofuels reduce consumption of fossil fuels
    and lower CO2 emissions?
  4. At what cost?
  5. High food prices and biofuels, are they related?
  6. A threat to food security?
  7. Bioenergy activities in FAO work in progress
  8. Concluding remarks

Bio-energy Today
  • Bio-energy already accounts for 14 of total
    world energy use 33 in developing countries
    (70 in Africa) but only 2-3 in industrial
  • Small scale burning of biomass accounts for most
    household source of energy for cooking and
    heating in poor countries (2-3 billion people!)
  • Liquid biofuels used for transport still small
    40 of transport fuel in Brazil but only 3-5 in
    USA and EU and even less elsewhere

Source P. Hazell and R.K. Pachauri (IFPRI, 2007)
Biofuel production in the OECD countries
relative to world production (million liters)
Source International Institute for Sustainable
Development (iisd), Global Subsidy Initiative
program (GSI) September 2007
High food prices and biofuels, are they related?
Explaining the nature of price linkages...
  • As energy prices rise, costs of agricultural
    inputs (fertilizers, pesticides and diesel)
    increase, putting pressure on agricultural
  • Also biofuels derived from different feedstocks
    become competitive with fossil fuels at different
    levels (so-called parity price), putting pressure
    on the prices of feedstocks
  • The link weakens as rising feedstock prices make
    them too expensive as a source of fuel

Competitiveness by feedstock
Parity prices PetrolCrude oilBiofuels Various
feedstocks and farming/production systems
Crude, US/bbl
Petrol, US/l
Gasoline-Crude US
Cane Brazil, top producers
Cane, Brazil, average
Cassava, Thai oil, 2 mio l/d
Maize, US
Cassava, Thailand, OTC joint venture
Palmoil, MPOB project
Mixed feedstock Europe
BTL Synfuel/Sunfuel
Source J. Schmidhuber, FAO ( 2005)
Biofuels at What Cost?
Net Production Cost
(US per liter of fuel)
Source FAO
FAO food price index and CRBcommodity and energy
FAO price indicesfor selected commodities(1998-2
Source FAO (Food Outlook, November 2007)
Preliminary FAO work on assessing the importance
of different factor in price formation
  • A priori, we may assume that recent grain price
    hikes are determined, inter alia, by the price of
    petroleum, stocks in the major grain exporting
    countries, the US exchange rate relative to its
    major trading partners and in the case of maize,
    by the quantity of industrial demand a proxy
    for biofuel. That is,
  • Ptwt f(Ptoil,STt wt.mj.ex,XRtUS)
  • Ptmz f(Ptoil,STtmz.mj.ex,XRtUS,QDtind),
  • VAR models for the above were estimated over the
    period 1978 to 2007 using annual data.

Notes VAR Unrestricted Model - Based on data for
Major Exporters only All Data Logged - Prices
in Real Terms -Oil in Brent
Source A. Prakash, FAO (2007)
Factors driving higher grain prices - Can their
influences be measured?
  • Main results
  • The specified variables, together, capture around
    90 of the variation in grain prices
  • Statistically, grain prices are strongly
    influenced by the specified variables
  • Causality tests (Granger) showed that variations
    in prices are both caused by past variations in
    these variables, jointly and individually
  • Relative influences
  • Changes in maize and wheat prices were
    decomposed by the relative contribution of each
    variable. Changes in stocks have the greatest
    influence on prices

proportion of change (?) in maize price explained
by changes in ?Ptmz ?STtmz.mj.ex ?QDtind.
?XRtUS ?Ptoil 0.27 0.35 0.12
0.11 0.15
proportion of change (?) in wheat price explained
by changes in ?Ptwt ?STtwt.mj.ex ?XRtUS
?Ptoil 0.44 0.25 0.15 0.16
Results based on forecast error variance
Source A. Prakash, FAO (2007)
Wheat stocks and price
Maize stocks and price
Source FAO
Coarse Grains exporters
Coarse Grains stocksand ratios
Source FAO (Food Outlook, November 2007)
Maize utilization and exports in the USA
Soybeans/Maize nearby futures ratio
Source FAO (Food Outlook, November 2007)
Biofuels Tomorrow
  • By 2010 the EU plans to double the share of
    renewable energy in its primary energy
    consumption to 12. Biofuels will increase to
    5.75 of total transport fuels
  • The USA also plans to more than double its
    current 2 share for biofuels by 2016 but this
    may accelerate
  • Brazil plans to increase biofuels share from 37
    to about 60 by 2020
  • China and India have launched new bio-energy

Source P. Hazell (2007)
Projected grain utilization in OECDand non-OECD
Coarse Grains
Source OECD-FAO Agricultural Outlook 2007-2016
Outlook for selected world crop prices to 2016
(Index of nominal prices, 19961)
Source OECD-FAO Agricultural Outlook 2007-2016
A threat to food security? How the Low Income
Food Deficit Countries are/could be affected?
  • What is food security?Food security exists when
    all people, at all times, have physical, social
    and economic access to sufficient amounts of safe
    and nutritious food that meets their dietary
    needs and food preferences for an active and
    healthy life
  • Four dimensions of food security Availability,
    Access, Stability and Utilization

Food Security Availability
  • Availability of food could be threatened by
    bio-energy production
  • currently, about 14 million hectares (1 of the
    worlds arable land) used for liquid biofuel
  • 2.5-3.8 arable land could be used for biofuels
    by 2030
  • and 20 of the worlds arable land by 2050

Source FAO - CFS 33rd Session-May 2007
Food Security Access
  • Access is influenced directly by food prices and
  • In the longer run, the competition between food
    and fuel could be alleviated
  • The expanding market for biofuel feedstock could
    contribute significantly to higher incomes for
    farmers and offer employment opportunities in
    rural areas

Food Security Stability
  • Stability can be disrupted by price volatility
  • Expanded use of agricultural commodities for
    biofuel production could increase the volatility
    of food prices
  • Increased risks for the environment

Food Security Utilization
  • Affected by bio-energy, but less directly so than
    for other aspects
  • Utilization is closely linked to health status
    and access to clean water
  • Bio-energy could make water less readily
    available for household use
  • On the other hand, modern bio-energy could make
    cooking both cheaper and cleaner

Food security effects of rising pricesacross
  • Rising food and fuel prices will likely
    compromise food security of countries that are
    net importers of both food and fuel as their
    current account deficits increase
  • two-thirds of 47 low income food deficit
    countries (LIFDCs) for which data exist are also
    energy deficit and
  • include countries like Bangladesh, Ethiopia,
    Eritrea, Ghana, Haiti, India, Kenya etc.
  • Countries that are net exporters of both food and
    fuel will find themselves in a win-win situation
  • For countries that are net exporters in one and
    net importers of the other, the situation depends
    on the relative size of the food or energy
    exports and imports

Forecast import bills of total foodand major
Source FAO (Food Outlook, November 2007)
Forecast changes in food import bills of selected
LIFDCs 2007 over 2006 ()
Forecast changes in global food import bills by
type 2007 over 2006 ()
Source FAO (Food Outlook, November 2007)
Who are the hungry?
World 860 million Developing countries 830
Source FAO
World Development Report 2008
  • 75 of the worlds poor live in rural areas and
    most work in agriculture
  • Majority of the worlds poor will still be in
    rural areas in 2040
  • Agricultural growth is the main engine for
    poverty reduction
  • For the two-thirds poorest, income growth
    originating in agriculture has more impact than
    income from non-agricultural sectors

Source World Bank (2007)
Which biofuels? Jatropha factor!
  • Is it economic at current (rising) oil price?
  • Does it have favorable energy and carbon
  • Will it conflict with food production?
  • Can biofuel production be made pro-poor? Scale
  • Should countries invest in it now or wait for
    next generation technologies?

Constraints to investment
The way forward
  • Who are the poor and most food insecure relative
    to bioenergy development?
  • Identify and respect national priorities about
    food security and self-sufficiency (maize)
  • Land and legislation could be serious hurdles to
    bioenergy investment
  • Resolve potential conflict over access and
    control of natural resources
  • Source of income and energy
  • Create incentives for reinvestment
  • Stimulate domestic economy and rural development
  • Source of export earnings even as a feedstock?
  • Legislation
  • No legislation in place for Bioenergy
  • National Bioenergy Task Force
  • Land Tenure
  • All land owned by state
  • Released to villages, state, individuals
  • Infrastructure
  • Scale matters and the technology is highly
    capital intensive
  • Very limited number of roads
  • Bioenergy proposals always close to existing
    infrastructure (road or railroad)

Bioenergy activities in FAO work in Progress...
  • Examples (i) Technical assistance to member
  • Project formulation and technical advisory
  • Support the design and implementation of
    bioenergy policy and programmes
  • Country studies/projects Argentina, Belarus,
    Chile, China, Costa Rica, Croatia, Dominican
    Republic, Myanmar, Peru and Slovenia
  • Respond to requests for investment, feasibility
    and technical support
  • Examples (ii) Cooperation with national,
    regional and international partners
  • Secretariat of the Global Bioenergy Partnership
    (GBEP) at FAO
  • FAO currently Vice-Chair of UN-Energy, with
    bioenergy as one of the main programme elements
    of this interagency mechanism
  • Increased requests and activity on bioenergy from
    FAO Reg Offices
  • FAO partners with numerous intergovernmental

Bioenergy and Food Security (BEFS) Project
  • Three-year - USD 3.7 million 11 January 2007
  • Guidance on potential effects of bioenergy on
    food security in developing countries
  • Started country selection process and development
    of analytical framework
  • Capacity-building, policy formulation and
    technical guidance
  • National Bioenergy Teams and replicable project
  • Legislative Framework Report

Concluding remarks...
  • high oil prices and the need to reduce greenhouse
    gas emissions are among the important drivers in
    this fast expanding sector.
  • grains/oil plant-based biofuels are becoming a
    major source of demand but they are expensive to
    produce and currently rely on high subsidies and
    market protection
  • debates on their net energy balance and on their
    effectiveness in reducing carbon emissions
  • in the meantime, food prices are affected
    (increasing) although other factors such as low
    food inventories have had even more significant
  • there are good reasons to caution against too
    much reliance on biofuels as a way forward in
    getting away from using risky fossil fuels
  • but biofuels can empower rural poor farmers in
    developing countries, to embark on faster income
    growth and development
  • assuming access to technology and land tenure as
    well as availability of adequate infrastructure,
    capital, legislations, etc.
  • a carefully planned, tailored, sustainable,
    bioenergy strategy is needed

Relevant International Meetings/Reports
  • World Development Report 2008 Agriculture for
    Development (World Bank, October 2007)
  • Food Outlook (FAO, November 2007)
  • World Energy Outlook 2007 from International
    Energy Agency (IEA)- provides medium to long-term
    energy market projections and analysis with China
    and India as its special foci in this years
    report (7 November 2007)
  • The Intergovernmental Panel on Climate Change
    (IPCC) - Synthesis of IPCC Fourth Assessment of
    the state of knowledge on climate change (17
    November 2007)
  • United Nations Framework Convention on Climate
    Change (UNFCCC) - Bali, 3 - 14 December 2007
  • Food Outlook (FAO, June 2008)
  • FAO High-Level Conference on World Food Security
    and the Challenges of Bioenergy and Climate
    Change 2-5 June 2008
  • OECD-FAO Agricultural Outlook 2008-2017 (July
  • State of Food and Agriculture 2008 (SOFA), FAO.
    Focus Bio-energy (November 2008)

Key FAO contacts on bioenergy
  • Chairman of the Interdepartmental Working Group
  • SOFA 2008 Bioenergy
  • Global Bioenergy Partnership
  • International Bioenergy Platform (IBEP) Website

Grains Team in FAO Trade and Markets Division
A. Abbassian (Analyst and the Secretary of the
Intergovernmental group for Grains) Abdolreza.Abba Tel (39) 0657053264 C.
Cerquiglini (Database Management and World
Outlook Reports) J.
Heine (Database Management and Monthly News
Report) S. Ripani
(Administrative Assistant)
FAO Grains Website
MORE IN......
July 2007
October 2007
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