We reap what we sow using crops for biofuels

So biofuels are not such a great idea after all. There is a ferocious debate about the extent to which efforts to promote them are responsible for the rise in world food prices, but it is undeniable that if you have a sharp decline in the supply of a basic food crop such as maize, and even a modest increase in demand, there is liable to be a big effect.
We know that from the oil market, where a small disruption in supply has a huge impact on the price. Some one-third of the US maize crop is now being turned into fuel and therefore taken out of the food supply, so it would be astounding were prices worldwide not to soar. Since maize is such a basic crop, it would be astounding too were it not to pull up the prices of other grains, and of meat as animals are part-fed on grain. The requirement of the EU to incorporate a proportion of biofuel into regular output adds to the pressure. Indeed, were you to try to develop a policy designed to increase the price of food worldwide, this would be about as effective as you could get.
So what should we conclude? Three thoughts.
First, it is too early to try and put hard numbers on the proportion of the rise in food prices that should be attributed to the switch to biofuel. On the other hand, the impact must be substantial and we should be honest with ourselves about that.
The second is to suggest that politicians need to grasp the laws of supply and demand – and the law of unexpected consequences. Well-intentioned people can do a lot of damage if they don't understand economics. It cannot be sensible to subsidise British wine-growers to produce fuel for Prince Charles' Aston Martin. Rationally it is absurd, yet it was presented to the public last week as an environmentally friendly gesture.
Third, we should not dump the idea of biofuels just because our first foray into them has led to a global catastrophe. It should be possible to grow fuel on marginal land and using crops developed for fuel, rather than for food. But it will take time – and honest economics.