Undercurrents: beneath the obvious

December 18, 2007

Food and Fuel Compete for Land

Filed under: Ethanol,Great Lakes Issues — nemo @ 1:23 pm

Ethanol manufacturing uses a tremendous amount of water which is why ethanol has been a topic here, here, and here for so long. If you’re new to the debate start here with 10 Things to Know. Then read this New York Times piece on the rising price of food:

For years, cheap food and feed were taken for granted in the United States.

But now the price of some foods is rising sharply, and from the corridors of Washington to the aisles of neighborhood supermarkets, a blame alert is under way.

Among the favorite targets is ethanol, especially for food manufacturers and livestock farmers who seethe at government mandates for ethanol production. The ethanol boom, they contend, is raising corn prices, driving up the cost of producing dairy products and meat, and causing farmers to plant so much corn as to crowd out other crops.

The results are working their way through the marketplace, in this view, with overall consumer grocery costs up roughly 5 percent in a year and feed costs up more than 20 percent.

Now, with Congress poised to adopt a new mandate that would double the volume of ethanol made from corn, ethanol skeptics say a fateful moment has arrived, with the nation about to commit itself to decades of competition between food and fuel for the use of agricultural land. [From Food and Fuel Compete for Land – New York Times]

I’m not too bothered about the price of corn. It is actually a fairly lousy food source, with low yield of edible bits compared to the volume of the plant. It is not well digested by humans, and it has very little nutritional value, other than the energy value from the sugar content.

The problem is that ethanol subsidies have created an artificial market for corn which is causing agribusiness to convert from farming something that does have some nutritional value to growing feedstock for fuel, This shift in growing has a huge impact on water usage — a 50 million gallon per year ethanol plant would require 265 million gallons of water and reduce our dependancy on oil by only 2.5%.

The problem isn’t ethanol itself, despite its profound drawbacks as a fuel. The problem is the subsidies completely screwing with the market.


1 Comment »

  1. When U.S. farm policy had a production control focus, corn prices were much higher in constant dollars than today’s highest prices. From 1958 to 1966, corn averaged $7.27 per bushel in constant 2006 dollars. Wheat averaged $11.12.

    In 1973, the Nixon administration decided to ditch production controls and put American agriculture on an export focus. Over the decades, prices were forced down by dropping the CCC loan rate, the value of grain as collateral for production loans, below cost of production. A deficiency payment (subsidy) was to make up the difference. By the early years of the new century, corn was down to $2.00 per bushel.

    This cheap grain has been a huge subsidy from farmers to consumers and livestock producers. This farmer subsidy to consumers is an order of magnitude greater than the government subsidy to corn farmers.

    If export use is included, three-fourths of the corn crop goes into animal feed. While corn ethanol has an energy return of 1.3 (not great, I agree), animal grain-to-meat return rate is abysmal, from a low of 0.08 for cattle, to 0.12 for hogs, to 0.3 to 0.5 for poultry. If you’re truly worried about the impact of corn farming, you should stop eating meat.

    It appears that conventional crude oil production hit its peak in 2005. We are now on a production plateau and about to start on the downswing. We have to start making a conversion somewhere. You go from the known to the unknown. Corn ethanol is easy. It is a pioneer technology, trying out systems that will lead to something else.

    The dominant factor behind the recent explosion of corn ethanol production is not subsidies, it’s the elimination of MTBE as an oxygenator for gasoline, leaving ethanol as the only viable alternative, at present.

    Oil prices rose 57% in 2007, while the dollar dropped only 10% in value. The market realizes that oil supply has become inelastic, world demand is up, especially from China and India, and there is not much risk in bidding up oil futures to $100 a barrel.

    In a similar vein, food supplies have become inelastic, as the world’s population, and, more importantly, its hunger for meat, have caught up with the production gains of the Green Revolution. Wheat prices have climbed much more than corn, and wheat is not used for fuel ethanol.

    Comment by fred schumacher — January 4, 2008 @ 1:38 pm | Reply

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