Blame It on Biofuels; Cornflake makers and socialists alike are pointing to green fuel for high food prices. Are they right?

Byline: Barrett Sheridan

High food prices always hit the poor hardest, and these days there is plenty of bad news. Corn prices are nearly $4 a bushel, almost double their 2005 level. In Mexico, for instance, that translates into a 50 percent rise in the price of corn tortillas, which has elicited protests from tens of thousands of workers. Many blame the burgeoning U.S. biofuel industry, centered around corn-based ethanol, for the crunch. Fidel Castro says diverting corn into fuel is a "tragic" turn of events for the world's poor, while Venezuela's Hugo ChAvez calls it "craziness."

They aren't the only ones pointing the finger at biofuels for high prices--food makers like Kellogg's are also. While biofuels are a convenient scapegoat, global food economics are a complex phenomenon. A surge in global food demand, high oil prices, uncooperative weather, currency fluctuations and biofuels all play a part in explaining the new, stratospheric world of food economics.

About a third of the recent corn-price rise is "just a currency issue," says Peter Timmer, an agricultural economist at the Center for Global Development. The dollar

has plummeted against most of the world's currencies, and since most internationally traded foods are priced in dollars, the price hikes lose some of their bite abroad. "If you look at food-price inflation from a euro-currency perspective," he says, "it doesn't look as bad as it does in dollars."

Bad weather has also played its part. Drought in Australia ravaged its wheat crop last year, and exports fell by more than 20 percent. Recent flooding in China has destroyed 5.5 million hectares of wheat and rapeseed, and an abnormally dry growing season across northern Europe threatens grain yields. Longer term, Timmer sees two worries: that these are early signs of a climate change, and that there is no new Green Revolution underway to create tougher crops. "Agricultural scientists are quite concerned about the lack of a pipeline of new technology," he says.

Rising oil prices hurt, too. Food expert Michael ...