In recent years in many regions of the world there has been a rapid expansion in diversion of grain to animal feed and biofuel production. Since 2007 this has coupled with rise in price of cereals adversely impacted food markets and the whole food systems. 

A recent research made by Overseas Development Institute (ODI) – “Diverting Grains from Animal Feed and Biofuel” – has revealed some possibility of impacting food prices by diverting grains from using for animal feed and biofuel production to grains for human food consumption. According to the research more than one third of world’s cereals produced (38%) is currently used for either animal feed or biofuel. For instance in US over 10% of corn production in 2002/3 utilized for biofuel – ethanol and increase to 18% in 2006/7 shows an increase forecast (SAC and Biofuels Matters Ltd, 2008). Similarly, a report by EurObserve’ER revealed an increased trend of biofuel consumption by EU. Between 2011 and 2012 EU biofuel consumption grew by 2.9 %, to nearly 14.4 million metric tons of oil equivalent. 

Therefore, the research has proposed by diverting grain from animal feed and industry use to human consumption as a response to spikes in food price. The findings of the research show that it is technically practical that grain diversion can work at international level when it is clear that most of the grains going to animal feed could be used for human food. Of the 2,100 million tons of cereals produced annually, 800 million tons or more is used to feed animals or for industry, including biofuel, equivalent to close to 40% of total production. Of the major cereals consumed by people, maize and wheat use the greatest volumes for feed and industrial uses as they are more versatile than grains such as rice. Could some of this be diverted to human use, temporarily, until a price spike passes by? Worldwide, had around 10% of feed grains been diverted in this way in 2008, it may have prevented that year’s price spike. 

However, this may be less true at national level where the major cereals – maize and wheat – utilized for animal feed and biofuels are less consumable or not major staple foods in the society. Grain diversion is also less practical or irrelevant in Less Industrialized Countries (LDCs) where the volume of cereals used for animal feed or biofuel is insignificant as compared to the government cost for the diversion scheme. In reality it would only have the potential to work in countries with substantial volumes of cereals fed to animals or used for biofuels, where people’s diets include relatively large proportions of maize and wheat, and with the capacity to implement such a scheme, In effect, this rules out most LICs. Mexico and South Africa fulfilled the criteria for animal feed and the US for biofuels. 

The research noted the grain diversion scheme cannot be used as standalone policy to effect food prices. In both countries – South Africa and Mexico - grain diversion would only work if complementary trade management policies were deployed, which would be unpopular. It would mean controlling grain exports for South Africa and an unlikely combination of compulsory import ../../../eng/News/quotas_and_export_bans_for_Mexico._nbsp.css;

A full copy of the ODI research is available here 

Other sources: 

http://www.energies-renouvelables.org/observ-er/stat_baro/observ/baro216_en.pdf

Impact of Biofuel of Dairy Feedings ((SAC and Biofuels Matters Ltd, 2008)