International Monetary Fund: Using Food For Biofuel Will Increase Food Prices Worldwide

Washington, D.C. (AHN) - Until new technologies are developed, using food to produce biofuels might further strain already tight supplies of arable land and water worldwide, pushing food prices up even further.

The International Monetary Fund (IMF) gave this warning in a report released ahead of the IMF-World Bank Annual Meetings that starts Saturday, adding droughts, animal diseases and demand for biofuels pushed up food prices and inflation this year.

Higher biofuel demand in the United States and the European Union has led to higher corn and soybean prices. It also boosted the price of substitution crops and increased the cost of livestock feed.

Poor harvests in many countries and outbreaks of animal diseases (as in China) led to further price hikes, it added.

Higher international food prices have put upward pressure on inflation, according to the IMF's October 2007 World Economic Outlook (WEO).

Realizing the potential benefits of biofuels requires better policies, the WEO said. Brazilian ethanol derived from sugarcane, for example, is less costly to produce than corn-based ethanol in the United States, and yields greater environmental benefits.

If tariffs and subsidies in the United States and EU were eliminated, biofuels would likely be produced largely by lower-cost producers such as Brazil and other Latin American countries. Biodiesel would be produced mostly by Malaysia, Indonesia, India and some African countries.