WASHINGTON - A recently released report from the World Bankï¿½ï¿½s Development Prospects Group found that "the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors (the so-called 'financialization of commoditiesï¿½ï¿½) may have been partly responsible for the 2007/08 spike." A 2008 World Bank report had attributed 75 percent of the commodity price spike to biofuels.
Energy prices contributed significantly to non-energy commodity price spikes seen recently, write authors John Baffes and Tassos Haniotis in "Placing the 2006/08 Commodity Price Boom into Perspective."
The authors also conclude "that a stronger link between energy and non-energy commodity prices is likely to have been the dominant influence on developments in commodity, and especially food, markets. Demand by developing countries is unlikely to have put additional pressure on the prices of food commodities, although it may have created such pressure indirectly through energy prices."
The authors point out that "worldwide, biofuels account for only about 1.5 percent of the area under grains/oilseeds." Because of this, biofuels would not have as much of an impact on global demand and commodity price booms.
"In reversing course, this World Bank report reaffirms the marginal role biofuels play in world commodity and food prices," said Bob Dinneen, president of the Renewable Fuels Association, in a statement. "The RFA has long noted that ethanol production has continued to increase while corn prices have now returned to normal levels. Volatile oil prices, speculation, and adverse weather conditions all played far more significant roles in driving commodity prices to record and near record prices."