ActionAid Report: True Cost of Ethanol in Times of Drought

Date Posted: October 16, 2012

Washington DC—New research Oct. 10 provides the latest numbers behind ethanol’s toll on global food prices—$11.6 billion in higher prices for corn importing countries over a period of six years.

More than half, $6.6 billion, of that was borne by developing nations, where a high percentage of household income is spent on food.

The report, Fueling the Food Crisis: The Cost to Developing Countries of U.S. Corn Ethanol Expansion, was issued by anti-poverty group ActionAid USA, based on work by researchers at Tufts University.

The study found the corn-importing countries of Central America and North Africa to be at the highest risk from ethanol expansion in the US.

The US drought has diminished corn supplies, re-igniting the debate over how much corn should go to fuel for cars in light of spiking global food prices.

“Last summer’s drought clearly illustrates that we cannot always produce enough corn for food, feed, and fuel, and those living in poverty pay the ultimate price,” says Kristin Sundell, Policy Analyst at ActionAid USA.

“Strong policy should not be based on prayers for good weather, especially when the stakes are so high.

"From the US EPA to the G20, it is time to recognize that current biofuel mandates are unsustainable.”

ActionAid is calling on G20 leaders, who are meeting on World Food Day October 16, to eliminate incentives that encourage unsustainable biofuels production.

Nationally, they are calling on the EPA to waive ethanol mandates so that food is not used as fuel when crops are scarce.

Lastly, ActionAid is calling for securing increased investment for smallholder farmers and safeguarding women’s rights to land so that food can be produced locally to address food insecurity and curb price volatility.

"This is the third serious food price spike in five years, and it is obvious that world leaders have not learned the lessons from the first two nor taken action to address their causes," says Tim Wise, author of Tufts University study.

"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."

"With less corn available for food producers and a greater portion of potential-feed being syphoned off to ethanol, our members are concerned with the global impact this mandate is causing," says Joel Brandenberger, President of the National Turkey Federation.

"Our members feel it is their obligation to contribute responsibly to the global food market, and the ethanol mandate is strangling their ability to affordably provide food to importing nations."

"The Action Aid report makes two things abundantly clear," says Marlo Lewis, Senior Fellow, Competitive Enterprise Institute Lewis during a press call to release the report.

"First, the RFS is making it harder for the world's poorest people to feed themselves.

"Second, the RFS consumption and blending mandates should be eliminated or, at a minimum, automatically reduced when corn stocks fall below critical thresholds."

The report found corn ethanol had the following impacts on net corn importing countries over a period of six years:

• Central America experienced $368 million in higher costs;

• Guatemala absorbed $91 million in higher costs, after import dependence grew from 9% in the early 1990s to nearly 40% today;

• North Africa saw $1.4 billion in price increases, with the strongest impacts falling when unrest became widespread in 2009-10;

• In the price-spike of 2008, the world’s least developed countries imported $26.6 billion in agricultural goods and exported only $9.1 billion, leaving an agricultural trade deficit for these overwhelmingly agricultural countries of $17.5 billion, more than three times the deficit recorded in 2000 ($4.9 billion).

• Africa as a continent spent $1.6 billion more on food imports due to US ethanol policy;

View the full report Fueling the Food Crisis: The Cost to Developing Countries of U.S. Corn Ethanol Expansion here.

For more information, call 202-351-1757.

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