Again Ethanol and Food are in Conflict

Once again the conflict between the use of corn for ethanol production and the amount of corn available for consumption by swine, beef, dairy and poultry has come into conflict.

Corn prices have increased an astounding 85% in 6 months.

There simply is not enough corn to go around, and thus the price of corn increases RusBankNet. When corn prices rise, prices of other grains also rise. Wheat, rice, even barley rise.And surprise, surprise, the price of  processed food rises.  Why is this?

First, one has to look into the dark world of agricultural economics. Corn, in many ways similar to oil, is a world-wide commodity. Many countries produce corn (for example, China grows more corn than the United States, but has a lot more people to feed). But only a few countries have enough left over to sell on the world markets. Argentina along with the United States are the main exporting countries. And when the corn crop declines in other consuming countries such as China or Mexico, they buy more corn on the open market. And as these countries move “up the food chain” to consume more red meat, pork, dairy and  poultry, they need more corn. So they buy corn from those few countries that have some to spare. But with several countries bidding for corn and a limited supply, the price goes up. It is an “inelastic” situation.  If corn is not available, wheat will do nicely, so will sorghum, etc. So these grains become more valuable. And “wala” food prices rise. Most affected are foods that rely on corn, such as pork, beef, chickens and eggs. But bread soon follows. and this brings food riots. Even the recent uprising in Egypt is being blamed in part on rapidly increasing food prices (I feel this is a stretch,but do not claim to be well-informed in such matters). Even the price of tamales goes up in Mexico. Sure they use white corn, but white corn is also good pig feed so it is bidding against our yellow corn.

Ethanol plays a central role in this fray. Processing a bushel of corn gives about 2.8 gallons of ethanol (less if one converts the energy in ethanol to a gallon of gasoline). The government in its wisdom has mandated that we must use about 12 billion gallons of ethanol by next year. That translates to a lot of corn, about 25% of all the corn grown in the United States. In Iowa, by far the largest ethanol producing state in the nation, about half the corn goes to ethanol. So when supply goes down while demand goes up, the market “bids” for corn. They buy corn from other uses by paying a higher price, and the higher price encourages farmers to plant more corn next year. More grassland and highly erodible land go into cultivation. This increases erosion and water pollution, and turns the countryside even more into a row crop desert.

It seems pretty clear that changing climate is impacting the discussion. This past year, corn production dropped in the United States by about 9%, a huge decline. Bad weather in other parts of the world have cut down on grain production as well. In the meantime, demand for meats and  for foods made from corn continues to increase.

The struggle between the farm state politicians who push for ethanol from corn (and they must or they are summarily dismissed by the farm block supporters such as Farm Bureau and National Corn Growers) and the rest of the country who are being pressured by food wholesale and retail interests, as well as by swine and poultry growers). It is all part of the farm bill, no matter how altruistic the discussion may be.

I have said for years that ethanol policy was really corn policy. Its objective was to assure a demand for corn and a stable high price. Well it worked. Now we have the unintended consequences. At least for the next few months higher prices for many food staples will increase. And to hear some say it, corn based ethanol is to blame. I tend to agree, but as you can see, it is not simple. But then nothing in the convoluted world of farm policy is.

Ag Nominee Vilsack: Concerns on Ethanol, Biotech, Climate, CAFOs, Corporate Concentration, Hunger and Nutrition

In response to the blog post below, it is worth expanding, to clarify the reasons many in the sustainable agriculture community – and others who are concerned about sustainability, justice and public health – are feeling let down by the choice of the new secretary of agriculture, even as we try to remain hopeful about the overall direction of change.  
 
First, Tom Vilsack is a major proponent of ethanol production. Industrially produced corn ethanol has been disvalued for climate change mitigation because it contributes more emissions than it reduces. Further, industrial corn ethanol production leads to substantial environmental impacts from fertilizer and pesticide use. But the impacts go beyond environmental, to corn ethanol’s destabilizing effect on food prices around the world. The former U.N. special rapporteur on the human right to food has termed corn ethanol “a crime against humanity.” As of early December, the U.N. reported that nearly 1 billion people around the world are now undernourished; these numbers have risen substantially  in the wake of the food price spikes. Estimates on ethanol’s role in the rise in food prices range from a few percent up to 3/4. Vilsack does support moving over the mid-to-long term towards other forms of ethanol.  But even with alternate ethanol sources, significant problems in terms of land use for energy vs. food, corporate concentration, and unsustainable production methods are likely to remain. Read More >

Where’s the Grain?

Note: This is a response to an editorial posted in the New York Times.

Thursday’s Editorial (“The World Food Crisis,” New York Times, April 10, 2008) questioned the environmental and ethical impact of corn ethanol production. The question is: With more people and less grain, should we put the food in our gas tanks or in our stomachs?

It’s a good question. Here is another one: With more people and less grain, should we put so much grain into cows?

In the United States 70 percent of the corn harvest is fed to livestock.

Read More >