Biofuels and food prices
Posted April 17, 2008on:
Why is everyone acting so surprised about the fact that biofuel regulation will (and has) led to higher food prices? We said it would in August (well to be fair, Keith Woodford from Lincoln University said it before us, and other people were saying it before that 😉 ).
However, unlike some commentators, we do not believe that the fact that world food prices are rising should impact our decision on whether to make biofuels mandatory (something I don’t agree with), as NZ’s demand for biofuels will be so small that it won’t have an impact on the world price for food.
Also there are some unintended benefits for NZ from the mandatory regulations in the US and Europe. Corn etc has become more expensive, making it more costly for foreign dairy farmers to produce milk. This is part of the reason that milk spot prices have doubled over the last year – injecting a lot of money into the NZ economy.
Now the Dominion Post is a great publication, don’t get me wrong. But this illustration is so incredibly misleading. The illustration is supposed to make us feel like Stats NZ inflation statistics are a lie, with “only” 3.4% inflation compared to the 25% rise in this bundle. However, Stats NZ does take a representative bundle of goods, they re-evaluate it fairly regularly. The bundle in this illustration is not indicative of anyones grocery shopping – where is the meat (where price growth has been very weak).
Yes, the price of dairy products have gone up – the Stats data even says that. I would prefer it if people didn’t constantly act like the government and/or Statistics New Zealand is lying to them.