Biofuel vs. Food Crops: Who Decides?

What happens when a poor farmer discovers that the seed of a previously useless plant can be sold and then processed for biofuel? The farmer shouts "hooray;" the farmer's family shouts "hooray;" the government shouts "what a minute!" This is the basic plot of this story from Tanzania, reported by the BBC.

The seed in question is jatropha, which can be crushed into oil and used for everything from jet fuel to candles. Jatropha grows wild in rural Tanzania and is an extremely hardy crop: it's both drought and pest resistant and can withstand conditions that other plants can not tolerate.

After some enterprising children began selling jatropha seeds, adults in Tanzania followed suit, gathering the seeds and selling them to a biofuel processor called Diligent. Diligent is one of many companies in the US, Brazil, and the Phillipines, that is excited about the seed. In fact, early in 2009 Time magazine has asked: "Is jatropha `The Next Big Biofuel?'"

Maybe. But the BBC report notes that the Tanzanian government is worried that jatropha may be something of a curse, as well as a blessing. Here's a quote from the BBC:

"But here is the rub. The government is facing complaints that food production is being threatened because so many farmers are focusing on jatropha rather than edible crops. And that's something a poor country like Tanzania call ill afford."

Really? Farmers have found a valuable cash crop and now devote more of their land to growing that crop. This means less food is grown, this (presumably) raises prices for food crops. At the same time, farmers have higher disposable income because they're growing, and selling, jatropha. They can better afford more expensive food crops. But importantly, as food prices rise this signals the farmers to return to food crop production to take advantage of the profit opportunities offered there. As food production increases, supply increases and prices fall again.

Shifting prices are signaling farmers to grow jatropha; tomorrow, prices may signal farmers to grow tomatoes. Farmers are behaving entrepreneurially right now and that's something to be applauded. They may even be providing an environmental benefit to Tanzania (if the crop is drought and pest resistant presumably it can be grown without most pesticides and energy use related to irrigation will be slight).

So, should the government be concerned that too many farmers are foregoing food production to focus on jatropha? No, not so long as food producers inside and outside Tanzania are able to transport their crops safely and inexpensively and sell them freely.

If the Tanzanian government wants to ensure food supplies for the country, it would do better to eliminate agricultural tariffs rather than limiting entrepreneurial behavior related to jatropha production. What the country can ill afford is less economic opportunity -- poor farmers should be free to decide which crops to plant.

- Karol