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Uncontrollable Forces

April 10, 2008
Two editorials in the New York Times this week have claimed that rising oil prices are “uncontrollable forces” and “not anyone’s fault.” (See The World Food Crisis, 4/10/08 and Grains Gone Wild, Paul Krugman, 4/7/08). The implication is that biofuel policy in the United States IS controllable – and eliminating use of food crops for biofuels will allow U.S. grains to fill markets throughout the world.

This scenario ignores the effect that oil prices have on food and grain prices. And as recently as March 2008, OPEC members declined to increase production of crude oil, despite increasing worldwide demand.
Also, the most likely outcome of reducing demand for biofuels in the United States is a reduction in planting of grains. The USDA released its 2008 “Prospective Plantings” on March 31. The data show that farmers in the United States respond to market signals just like every other farmer in the world, by planting crops that will earn them the highest price. So how do we cut the Gordian knot?

British Prime Minister Gordon Brown got it right today when he wrote to Japanese Prime Minister Yasuo Fukuda asking him as chair of the G8 group of industrialised nations to take action to deal with rising food prices. His specific proposals include:
Improving developing country agricultural production: Rising food prices provide an opportunity as well as a challenge for poor countries - with three out of four poor people in the world living in rural areas and dependent on agriculture. We must help smallholders address problems of limited and insecure landholdings, lack of access to inputs and markets, poor rural infrastructure and inadequate market information. A large aid for trade package will be crucial.

Technology and research: Continuing international support for agricultural research will be crucial, along with reform of the international research system to achieve even greater impact on poverty and hunger. We need to undertake research to explore technological solutions to improve the security and consistency of supply. We must take the initiative to further develop higher-yielding and climate resilient varieties of crop."

The letter was also sent to UN Secretary General Ban Ki Moon, Dominique Strauss-Kahn of the IMF and Robert Zoellick of the World Bank.