President’s Corner: Food For Oil is Hurting the Poor

Today’s Financial Times reports that the UN’s World Food Program is “poised to ration food aid as prices soar.”

There are many implications to this development, but one that strikes me is that the world’s 35 million refugees and other displaced people, many of whom don’t have cars or even access to electricity, are beginning to pay the price of oil in the $100 a barrel range.

Food prices are rising across the world, in part because the U.S. is using increasing amounts of corn and other crops to make bio-fuels, such as ethanol, to supplement high-priced gasoline supplies. For years the U.S. has grown more food than it consumed, generating huge surpluses of corn, soybeans and wheat. Some of this food was used to help feed refugees and disaster victims around the world. But the decision to use corn to fuel SUV’s in the U.S. threatens to hurt the stomachs of displaced people in Darfur and elsewhere.

Rising food prices are becoming a problem around the world, not just in refugee camps. In Mexico, Egypt, Indonesia, Pakistan, and India, for example, poor and middle class food buyers are all struggling with higher prices. Egypt and Pakistan have recently expanded or re-installed food rationing systems. In many developing countries poor people are moving to two from three meals a day. The UN’s Food and Agriculture Organization predicts that poor countries will pay 35% more for cereal imports in the year ending next June 30, 2008, than the previous year, even though food purchases will fall by 2%.

“We are seeing a new face of hunger in which people are being priced out of the food market,” Josette Sheeran, the head of the WFP told the FT. “Our ability to reach people is going down just as the needs go up,” she said.

Of course, the WFP hopes that its threat to ration food distributions will prompt more monetary support from its donors. However, higher food prices are driving up the WFP’s budget by several million dollars a week, meaning that it is constantly playing catch up.

No country is immune from higher food prices. Food inflation is rising in the U.S. as well. Last year U.S. food prices rose by 4%, the fastest rate since 1990, and prices are expected to rise by as much this year. In the U.S., as elsewhere, the poor will feel the higher food prices first.

The food for oil exchange is bound to continue. The U.S. Air Force has flown a B-52 bomber on biofuel, and on Sunday, Virgin Atlantic flew a Boeing 747 from London to Amsterdam powered in part by mixture of coconut and babassu oil.

Starving poor people to keep jumbo jets in the air and cars on the road is not progress. Our appetite for transportation should not cut rations in refugee camps or lead to new bread rationing in Egypt. There are many reasons to look for ways to contain fuel price increases through conservation. Now there is a new one: to help maintain progress against starvation in the developing world.

--Ken Bacon