King Corn wins battle at UN
June 9, 2008 at 6:17 AM EDT
ROME — All hail the mighty American corn cob!
American corn was the biggest winner of the United Nations food summit in Rome last week. It wasn't supposed to be. Many countries and aid agencies - Egypt, Venezuela, Oxfam, even the director-general of the UN's Food and Agriculture Organization - came into the summit with corn, the de facto international symbol of the biofuels industry, in their gunsights.
They lost the gun fight. After three days of squabbling, the UN's final declaration did absolutely nothing to halt, even slow, the rise of the biofuels industry. Turning food into fuel was, in effect, sanctioned by the very UN food agencies that had called the summit to find solutions to the food crisis. People can go hungry. But heaven forbid that you can't find biofuels to fill your tank.
The outcome couldn't have made corn farmers happier. On Thursday, the day the UN yak-fest expired with a whimper, American corn prices rose to a record high. Corn for delivery in 2009, when one-third of the crop is expected to be consumed by the ethanol industry, reached a record $6.83 (U.S.) a bushel on the Chicago spot market.
That's about 250 per cent higher than the 2006 price.
Commodities analysts said corn would have taken a dive had the summit's biofuels fight gone the other way.
To be sure, the food summit had its good points. It was the biggest gathering of its kind since the early 1970s, the last time famine was mentioned in the same breath as rising food prices.
The Rome summit certainly raised global awareness about prices, malnourishment and the threat of starvation. Forty-four heads of state and government, from Albania to Zimbabwe, showed up. So did World Bank president Robert Zoellick and Dominique Strauss-Kahn, managing director of the International Monetary Fund. Billions of dollars in food aid were pledged. The summit ensured that food security will move to the forefront of the summer's G8 summit in Japan.
The bad news? It was a summit only in name. The event could have better been described as a sales convention, as if each country had a booth to hawk its own agriculture policy and badmouth the competition.
There was Brazil, defending sugar cane ethanol as an environmental and economic miracle while denouncing the corn-based version so adored by the U.S. and Canada. In another booth, Egyptian President Hosni Mubarak was complaining about food prices while insisting on doing his bit to ensure painfully high rice prices by imposing an export ban on Egyptian rice.
Down the aisle was Josette Sheeran, the executive director of the World Food Program, the world's biggest emergency food agency. She was thanking donor countries for the $1.2-billion funnelled into the WFP since March to fill a food procurement budget depleted by record prices for wheat, rice and other staples. But would she denounce biofuels for clobbering her buying power even though every delegate at the summit agreed the food-to-fuel surge has had at least some role in pushing up food prices? Forget it. Her reticence might have had something to do with the fact that ethanol-crazed America is the WFP's biggest donor (Canada, another ethanol junkie, is third).
The snazziest sales booth in the joint was run by Ed Schafer, the U.S. Agriculture Secretary. Call him Mr. Ethanol. The man expertly defused the anti-biofuels time bomb. He said the world can have great heaps of both biofuels and food, and claimed that ethanol accounts for no more than 3 per cent of the recent increase in food prices. The figure is, at best, optimistically low. The International Food Policy Research Institute of Washington, a research group funded by governments, puts the figure at 30 per cent. Other estimates are as high as 60 per cent.
Mr. Schafer's hard-line position put the UN Food and Agriculture Agency (FAO), the summit's sponsor, and the delegates of 181 countries in a bind. A declaration condemning biofuels, or even demanding they no longer be subsidized - the UN says developed countries last year pumped $11-billion into biofuel support - would alienate the Americans. They could retaliate by killing the final declaration, withholding funding to the three UN food agencies in Rome, or both.
In the end, predictably, the declaration did nothing more than call for more "studies" on biofuels' effect on food security. The subsidies will remain in place. So will government mandates of biofuel content in gasoline and diesel (Canada is bringing in a 5-per-cent ethanol content rule for gasoline) and import barriers (the U.S. imposes a hefty tariff on sugar cane ethanol from Brazil).
Worst of all, so will the upward pressure on food prices because of the diversion of land from food to fuel crops. In a food-scarce world, even the loss of 5 per cent of the arable land to food crops can push up prices significantly. In the European Union, as much as 15 per cent of the land will have to be devoted to biofuels if content mandates are to be met.
You have to feel sorry for the poorest countries. They expected the developed world to do a little more than fling guilt money at the problem. They left the summit frustrated and more than a little afraid that food will get scarcer before it gets plentiful, if it gets plentiful. But they learned something. They learned the American corn farmer is the biggest power of them all.