The FAO has called in its flagship publication The State of Food and Agriculture for a review of OECD biofuel policies and subsidies so as to ‘preserve the goal of world food security, protect poor farmers, promote broad-based rural development and ensure environmental sustainability’. FAO director-general Jacques Diouf argued that ‘current policies tend to favour producers in some developed countries over producers in most developing countries. The challenge is to reduce or manage the risks while sharing the opportunities more widely’. ‘If developing countries can reap the benefits of biofuel production, and if those benefits reach the poor, higher demand for biofuels could contribute to rural development’. However ‘opportunities for developing countries to take advantage of biofuel demand would be greatly advanced by the removal of the agricultural and biofuel subsidies and trade barriers that create an artificial market and currently benefit producers in OECD countries at the expense of producers in developing countries’.
While OECD biofuel policy is largely being condemned as exacerbating the food-price crisis, the question arises what happens to global prices, if the expected expansion in EU cereals production is diverted to exports to the world market rather than increased production of biofuels? Surely the danger exists that this could deepen price declines, to the detriment of current investments in developing food and agricultural production in developing countries?
In a context of declining oil prices and fears of a global economic down-turn, investment in biofuel production could well come under review, creating a situation where there was no longer a biofuel outlet for expanded EU cereals production.