Friday, February 25, 2011

Can We Please Stop Burning Up Food for Fuel?

Graphs showing how critical crop prices have spiked towards dangerous 2008 levels. (From The Financial Times, Feb. 25, p. 22)

As The Financial Times latest commodity indices show (Feb. 25, p.22), basic food crops prices are approaching dangerous territory, similar to the levels that triggered food riots in 2008. In addition, we know that much higher food prices have also helped to destabilize regimes in a number of the middle eastern nations now awash in protests, strife.

According to economist Joseph Glauber, quoted in the FT, the prices of all food commodities can be expected to rise even further, especially corn. The cost of food, at a wholesale level, is already at an all time high. Meanwhile, the USDA believes the current high prices will spur farmers to sow 9.8 million more acres with crop seeds this year, bringing the total planned acreage to nearly 256 million for the eight major crops.

Meanwhile, corn - the most widely grown crop - will likely occupy nearly 92 million acres of crop land or almost 36% of the total. The tragedy is that nearly one third of that amount, or 33 mllion acres, will likely be used to convert to ethanol as an alternative fuel to oil. This despite the fact that it takes 1.07 gals. of ethanol to make 1 gallon equivalent of useable fuel - a highly inefficient process. In addition, as more corn is removed from circulation for fuel, the cost of corn will continue to explode.

Can we really really afford to be burning a food crop up as fuel, especially in world now burgeoning with 7 billion? I don't believe so!

As the FT report ('U.S. Forecasts No Relief from Rising Food Prices', Feb. 25, p. 22) notes:

"Corn prices have risen 90 percent from a year ago, hitting a 2 ½ year high of $7.24¼ a bushel this month after the U.S. produced a large but disappointing harvest last year and demand for animal feed grows in emerging economies. Corn consumption also rose in the U.S. mainly to feed ethanol plants"

The FT notes that the heavily subsidised industry (they receive 51 cents for every gallon produced, which makes a mockery of capitalism) pumped out more than 13.5 billion gallons of the additive last year. This year, the USDA projects ethanol will account for 36% of total U.S. corn production.

Not to put to fine a point on it: this is a colossal waste of food!

With global food prices rising and more corn being diverted to the production of ethanol fuel, we now have Bill Clinton also warning of food riots in poor nations. The former president told farmers and Agriculture Department employees on Thursday (at an Agriculture Conference in Washington) that while producing biofuels is important for reducing America's dependence on foreign oil, farmers should also look beyond domestic production and consider the needs of developing countries in terms of food.

Clinton didn't mention it but one major way to do this would be to emulate Brazil (now nearly energy dependent) and substitute sugar cane for corn, to produce sugar-cane based ethanol. This form is also more net energy favorable with about 0.98 gals. of sugar-cane raw material to make 1 gallon equivalent of useable ethanol as fuel.

Sugar cane is also abundant in the U.S., for example major cane fields occupy south Florida and Louisiana. Sugar is furthermore a less desirable food than corn, and one can argue that it's contributed mightily to the U.S. obesity epidemic as kids especially continue to chow down on pastries, M&Ms, assorted candy bars and other snacks laden with sugar, not to mention cola drinks and other sweet soft drinks.

Thus, a transition to sugar-cane ethanol would also deliver a significant health benefit.

Cane producers themselves wouldn't lose money, but likely gain vastly more than they ever could by selling refined cane. As the example in Brazil has shown, many cane farmers have actually become wealthy while also making their nation energy-independent.

Let's hope the U.S. soon follows their example, especially as we are going to see 2 billion more hungry people within less than 10 years, as climate change continues to wreak havoc on crops. This is no time to be burning food to run cars!

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