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Three syllables. Alliteration. Simple and memorable – the type of messaging the politicians, and those that lobby them, adore.

The theory behind the phrase is a simple one. As crops or the land used to grow them is diverted to produce biofuels, like ethanol or bio-diesel, the cost of food will rise as a result of shrinking food harvests.


It is an elegant theory in its simplicity, as it conforms to the basic economics of a supply and demand curve. During the first decade of the 21st century, with the cost of food commodities rising alongside tremendous growth in the biofuels industry, the Food For Fuel (or Food Versus Fuel) theory began to gain popularity. By 2008, even the World Bank policy research teams began to question if biofuels were to blame for the spike in food prices in its aptly named working paper “A Note on the Food Crisis”.

In the intervening years, at least in the US & Canada, food prices have returned to a longer-term trend of decline in terms of percentage of household income and the debate has cooled. Food crop production in the US is currently at an all-time high with less land being under production, while food commodity prices have fallen. Many farms in the corn-belt are losing money, despite the ongoing growth of the US ethanol industry. Food For Fuel does not appear as credible a notion in 2015 as it did a decade ago. Even the World Bank has reversed its early position upon reflection and review of the data.

But what about developing countries? In many emerging markets, crop yields are usually nowhere near what they are in developed markets. Despite abundant natural resources and favorable climates, all too often land is underutilized or inefficiently cultivated. In extreme cases, like war-torn Sierra Leone, yields are barely above sustenance levels and regions often experience so-called “hunger months”: those months in the year when stocks have been depleted and the next harvest has yet to start.


Villagers in Sierra Leone

Some anti-poverty NGOs suggest that Food For Fuel is still a very real concern for developing countries like Sierra Leone. Appealing to the European Parliament, as it considers the new renewable fuel mandate beyond 2020, such groups claim that the development of biofuel projects in the developing world will result in loss of what little food production there is. The resulting increased scarcity of food will push prices beyond what the impoverished can afford to pay to feed themselves.

Like too many economic models, however, reality on the ground can be very different from the dire picture painted by such lobbying efforts. Although much goes into establishing a commercially viable biofuel operation, perhaps the two most critical elements are feedstock availability and stakeholder buy-in.

Ensuring adequate supply for a commercial-sized biofuel operation requires significant investment in agricultural technology and training if yields are to increase to a viable level. Not only does such investment create jobs locally, it also requires a transfer of agriculture knowledge and technology. This has an inevitable knock-on effect of increasing the food supply as local producers are given the skills to increase efficiencies and yields in producing food as well as feedstock for biofuels.

Skeptics might be quick to point out that land could just be grabbed and food production shunted off. There would be no increase in food security from such a knowledge transfer and the local population would be left significantly worse off…

Anyone making such an assertion, however, would likely reveal himself or herself as having never been involved in the long-term development of agricultural projects in emerging markets. Establishing the buy-in of local stakeholders is a key tool in risk management, especially for agricultural operations that are spread over thousands of hectares. Irrigation pivots, diesel generators and other vital equipment and supplies will quickly disappear into the night – along with future crops and any hope of achieving profitability – unless there is a clear demonstrable benefit for the local population.

An example of this advanced concept in project risk management in action is the Addax Bioenergy project in the Northern Province of Sierra Leone. With a legacy of civil war, little infrastructure and cyclical poverty, the interior of Sierra Leone is a challenging environment for any project. With the goal of producing 85,000 cubic metres of bio-ethanol and 15MW of electricity annually, the Addax project requires one million tons of sugarcane feedstock planted and harvested on 10,000 hectares of land leased from local landowners through local chiefdoms.

At the heart of the project is a strategy of transferring agricultural knowledge to both increase food security and provide local expertise in sugarcane development for the project. This strategy takes tangible form in the Addax Farmer Development Program (FDP), a 30-week agricultural course designed to teach better agricultural practices in addition to other skills, such as literacy, health and home economics. Since its inception in 2010, over 2400 men and women have successfully completed the FDP program and learned modern mechanized farming techniques that we take for granted here in the developed world. Furthermore, 2000 hectares of community rice and food crops have gone into production.


Farmer Development Program

According to interviews with locals posted on the project website, the “hunger months” are now a relic of the past and the relative cost of food has fallen as household incomes rise dramatically both from employment and sales of rice.

While it is still early days for the Addax project in terms of ethanol production and sales, it is clear that the biofuel development has brought a measure of enhanced food security to a corner of the world that has a history of relying on food aid. Without sustainable biofuel development this would not have happened, regardless of how low global food prices are. Might “FOOD FROM FUEL” be a more accurate alliterative axiom in the real world?


About the author: David manages investments in emerging markets, where he focuses on investments in renewables, clean technology and agribusiness related projects

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