Biofuels and Food Security

To reduce its oil import bill, the government of Brazil inaugurated a national bioethanol program (PROALCOOL) in 1975. An important direct effect of the program was the creation of huge domestic demand for its sugarcane market because sugarcane is the feedstock of bioethanol production, which has increased in Brazil since 1975. In the late 2000s the Brazilian government achieved the original policy target of PROALCOOL to reduce dependency of petroleum imports. The Brazilian bioethanol industry, including bioelectricity, is growing as one of the main energy industries in the Brazilian economy. While it is possible Brazil will expand sugarcane production to the Cerrado area, this may cause land-use change and environmental problems. Bioethanol and sugar are produced from sugarcane and the allocation rate for bioethanol and sugar is decided by the relationship between domestic bioethanol and sugar prices. Since 1990, more than half of Brazil’s harvested sugarcane has been for bioethanol use. Therefore, bioethanol and sugar production are competing by allocating sugarcane production. Soybean oil accounts for 71.7–90.9 % of the feedstock of Brazil’s biodiesel program, which the government has been promoting. Since 2005, production has increased rapidly; in 2012 the soybean oil use ratio in domestic soybean oil consumption increased to 32.2 %. This means the Brazilian biodiesel program has had an impact on global soybean and soybean products markets.

Food price hikes and biofuel expansion occurred all over the world from 2006 to 2008. Some agricultural and other specialists warned that biofuel expansion caused increases in agricultural commodity and food prices. There was a critical argument that global food-based biofuels may have a negative impact on food security on a global level. The author conducted research on how biofuel policy can impact on agricultural markets by utilizing economic models. As a result of the analysis for the Brazilian bioethanol policy, it was demonstrated that Brazil’s bioethanol policy has a floor price effect for the international sugar price and the increasing the anhydrous bioethanol blend ratio can play a role in reducing domestic sugar price instability. The analysis for the Brazilian biodiesel policy shows that the increasing biodiesel blend ratio will not always have a negative impact on the agricultural and food markets. The analysis of biofuel imports shows that the expansion of Chinese and Japanese bioethanol imports from Brazil could have an impact on world sugar markets. The analysis for the U.S. bioethanol impact on world corn markets shows that the U.S. bioethanol consumption could affect world corn prices by 22.2–37.4 %.

The Biofuel market created the linkage between energy and agricultural market prices. Biofuel policies and energy prices set the floor price of feedstock prices, and the energy prices and the upper limit of the biofuel blend ratio can decide the ceiling of feedstock prices. On the other hand, biofuels can also transmit price volatility from energy to agricultural markets, despite not always being the cause of price volatility of feedstock and related agricultural commodity prices. Brazilian bioethanol can play a crucial role in stabilizing the sugar market. One of the most crucial problems for increasing biofuel production is the competition with food and food related demand and agricultural resources. The definition of competition between biofuels and food can be divided into two dimensions; the competition with food and food-related demand and the competition with the agricultural resources. The feedstock of the second generation biofuels can compete with food and food-related demand, and agricultural resources. The development of second generation biofuels may not solve the problems associated with the competition between biofuels and food. However, the competition between biofuels and food doesn’t always have a negative impact on food security. The competition and food security impact on different dimensions. Biofuels can contribute to agricultural and rural development and can have a positive impact on a national and sub-national level, but they can also have a negative impact on household levels in the same country. International action is required to monitor whether biofuels can have a negative impact on food security and nutrition security at national, sub-national and household levels. Biofuels should be compatible with—and must not threaten—food security. The FAO in collaboration with other international organizations will have the responsibility of monitoring the impact of biofuels on food security and proposing policy recommendations to individual countries based on the results of the monitoring.