[PBN] Egypt Govt Urges End To Biofuel Subsidies

From: Dow Jones

LONDON (Dow Jones)--The U.S. and Europe should stop encouraging the
growth of maize and other crops for the production of biofuels, a
practice that is pushing up food prices and hitting the world's poorest
people, Egyptian Minister of Investment Mahmoud Mohieldin said Wednesday.

Egypt is one of the world's largest importers of grains, and the rising
price of food has sparked a series of strikes and demonstrations.

Textile workers, teachers, doctors and accountants have all threatened
strikes under the united banner of "Stop the expensive life" while
doctors went ahead last week with a one-hour work stoppage for better
pay and conditions.

The official annual inflation rate reached 12.5% in February, although
the cost of foodstuffs including subsidized bread has risen by 26.5%
over the past year.

In an interview with Dow Jones Newswires, Mohieldin said the diversion
of crops to produce ethanol in the U.S. and Europe is largely
responsible for the rise in world prices for grains.

He urged governments to end subsidies to increase the production of
biofuels.

"It is out of order," he said. "It sends the wrong signals to the world,
especially its poorer nations. It takes from the food of people to feed
the thirsty automobiles used by the relatively rich."

The U.S. energy bill includes a mandate for biofuel use of 9.0 billion
gallons in 2008. This mandate rises incrementally to 36 billion gallons
by 2022, of which 16 billion will need to be cellulosic biofuel, or
non-grain plant parts.

As part of the European Union plan to cut greenhouse gas emissions, the
target is to use 10% biofuels in road transport fuels by 2020, but the
E.U. is currently expected to fall short of reaching its 5.75% goal by 2010.

The U.K.'s Renewable Fuel Transport Obligation, which starts in April,
stipulates that fuel suppliers will be required to blend 2.5% biofuel
into all road transport fuels, increasing to 5% in April 2010.

Mohieldin said the increased use of food products to generate energy was
a source of inflation in Egypt and elsewhere.

"Inflation pressure is driven by that," he said. "We are facing imported
inflation, from imported food in particular."

The minister said the government's aim remains to reduce the inflation
rate to below 10%, and that monetary and fiscal policy would help
accomplish that goal.

Source: Paul Hannon, Dow Jones Newswires; +44 20 7842 9491;
paul.hannon@dowjones.com, (Lisa Kallal contributed to this report.)

Source: http://www.cattlenetwork.com/content.asp?contentid=206587
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