Biofuels: Food shortage fuels price rises

Demand for taxpayer subsidised biofuels in the US is driving this year's high food prices, a report has said. It predicts that food prices are unlikely to fall back down for another two years.

The report, produced by Purdue University economists for the Farm Foundation policy organisation, said US government support for ethanol, including subsidies, had fuelled strong demand for corn over the last five years.

The US department of agriculture reported earlier this month that US ethanol refiners were for the first time consuming more corn than livestock and poultry farmers.
The Centre for Agricultural and Rural Development at Iowa State University has estimated that 40% of the US corn crop now goes to make ethanol.

The report focused strongly on a US government mandate for ethanol production and 6 billion dollars in annual subsidies for ethanol refineries.

General Mills, which produces Cheerios cereal, Häagen-Dazs ice-cream and other major brands, also blamed ethanol subsidies for driving up food prices. Ken Powell the company's chief executive said the price of corn and oats was up by 30 to 40% over last year.

"We're driving up food prices unnecessarily, if corn prices go up, wheat goes up. It's all linked."