Drought Only One Factor Behind High Food Prices

http://www.spiegel.de/international/business/drought-not-the-only-factor-driving-up-agricultural-prices-a-851068.html

08/21/2012 21.08.2012

The Cost of Hunger

Drought Only One Factor Behind High Food Prices

The severe drought in the US has been blamed the rising prices of agricultural commodities. But that is only part of the story: Biofuels, financial speculation and changing dietary habits are also playing a role. The global food supply faces pressure from all sides. By SPIEGEL Staff snip

Securing the food supply is becoming a key issue on the international agenda, now that a global battle for agricultural commodities has erupted. "Food is the new oil," says Lester Brown, founder of the Washington-based Earth Policy Institute, "and land is the new gold." Politicians and citizens are worried about how the food supply can be guaranteed in the future -- and at what price. Four factors play a critical role here:

MORE BIOFUEL MEANS LESS FOOD.

Since 2005, US refineries have been required to add fuel derived from renewable sources to conventional gasoline. The United States is using this approach to reduce its dependency on fossil fuels. The problem is that the country is now using more corn to produce ethanol than to make animal feed.

About 40 percent of the corn crop is converted into biofuel, and less and less farmland is available to grow other crops. Investment firm Lupus Alpha is critical of Washington's environmental strategy because by subsidizing ethanol, the government has created a "demand monster." The UN Food and Agricultural Organization (FAO) argues that the ethanol requirement should be suspended immediately so as to defuse the "food versus fuel" conflict.