[HoosierRon]

Food vs. fuel a global myth

In the last five years:

• The U.S. corn crop has grown by 35%
• The U.S. production of distillers grain has quadrupled.
• The U.S. net corn food and feed production has increased 26%

For those that think the foregoing has resulted in the decreased production of other foods:

• Soybean plantings are up 18% this year
• Wheat plantings are up 6% this year

So why are prices going up? Simple: U.S. farm exports are up 23% this year.

More facts to ponder:

• There are 800 million acres of farmland in the U.S., and only about 30 percent of it is actually being used to grow anything.
• a $3 box of cornflakes contains 15 ounces of corn that cost 8 cents when bought from the farmer. So, farm commodity prices have almost no effect on retail prices.
• According to Merrill Lynch analysts, without biofuel programs, the price of oil would be about $13 a barrel higher than it now is. A $13 savings for each barrel could save the U.S. $65 billion in foreign oil payments.

 

[pinyon]

If these numbers are accurate, and I have no reason to think they're not, then I'm glad someone is debunking the food vs fuel frenzy out there right now.

I live in a place where E85 is virtually unavailable and what is around is no cheaper than regular gas. I'm not looking for big savings but I'd at least like E85 at a price that evens out the MPG loss. I just worry that the current environment won't help get E85 around here anytime soon.

 

[SJZ3]

Great article (editorial?).

I am not a big fan of corn ethanol (I think its going to prove to be transitional), but I am very suspect of these claims that ethanol is somehow driving up the price of food worldwide.

Apart from the detailed arguements laid out in this article...consider the fact that practically every single commodity everywhere is getting more expensive: Precious Metals, Petroleum, Coal, Aluminum, Steel, etc...

One thing is driving these higher prices: Demand. And that demand is coming from the tremendous growth of developing counries all around the world (BRIC, Eartern Europe, etc...).

There is nothing wrong with corn, wheat, and soy prices getting higher. If the demand is there, that's exactly what should happen.

And frankly, if those crops are more valuable as fuel energy istead of food...then that's what they should be used for. What should not happen are all these people trying to stop the technological revolution happening with Biofuels. These biofuels may or may not work out in the end...but let them develop and see where they go. Technology is too hard to predict, and shouldn't be artificially restricted.

 

[5 watt]

I have a feeling a lot of the hysteria around ethanol would go away if people realized that based on cost they eat more oil than food.

 

[Ach]

What then of the recent call by some Senators (including McCain) for the EPA to roll back ethanol requirements in coming years due to food prices? http://www.cnn.com/2008/POLITICS/05/05/gop.ethanol/index.html

 

[63GrandSport001]

What then of the recent call by some Senators (including McCain) for the EPA to roll back ethanol requirements in coming years due to food prices? http://www.cnn.com/2008/POLITICS/05/05/gop.ethanol/index.html

Its election season................

Many in the GOP are making money off of oil and want biofuels to go away as they threaten their oil profits......

They are on purposely putting out false information about the increased cost of food being from the increased use of bio fuels. Most Americans are not going to double check on this info and the mainstream news media will not report on it (smaller media outlets will and they are talking about it).

 

[HoosierRon]

Its election season................

Many in the GOP are making money off of oil and want biofuels to go away as they threaten their oil profits......

They are on purposely putting out false information about the increased cost of food being from the increased use of bio fuels. Most Americans are not going to double check on this info and the mainstream news media will not report on it (smaller media outlets will and they are talking about it).

You are giving politicians far too much credit. There is no conspiracy to manipulate oil company profits. The politicians are just pandering to society's lowest common denominator: food prices are high, so blame someone.

 

[63GrandSport001]

Great article (editorial?).

I am not a big fan of corn ethanol (I think its going to prove to be transitional), but I am very suspect of these claims that ethanol is somehow driving up the price of food worldwide.

Apart from the detailed arguements laid out in this article...consider the fact that practically every single commodity everywhere is getting more expensive: Precious Metals, Petroleum, Coal, Aluminum, Steel, etc...

One thing is driving these higher prices: Demand. And that demand is coming from the tremendous growth of developing counries all around the world (BRIC, Eartern Europe, etc...).

There is nothing wrong with corn, wheat, and soy prices getting higher. If the demand is there, that's exactly what should happen.

And frankly, if those crops are more valuable as fuel energy istead of food...then that's what they should be used for. What should not happen are all these people trying to stop the technological revolution happening with Biofuels. These biofuels may or may not work out in the end...but let them develop and see where they go. Technology is too hard to predict, and shouldn't be artificially restricted.

Basic supply and demand economics........

The only issue with our food prices is last I checked most of the increase in our food comes from oil being over $100 a barrel is fossil fuels is used in pretty much every step from our food being planted, the fertilizer and apply of it, harvesting, transporting, the packages use oil..............

Increases in total production is more then enough to supply the increase in exports.

 

[agman25]

The article blames OPEC for most of the problem..

Higher fuel prices increase the cost of production, transport, wages and packaging, the main cost of retail food. For example, a $3 box of cornflakes contains 15 ounces of corn that cost 8 cents when bought from the farmer. So, farm commodity prices have almost no effect on retail prices. But the effect of oil price increases can be huge.

Which brings us to the real culprit: the Organization of the Petroleum Exporting Countries. This year, with OPEC-rigged oil prices exceeding $100 a barrel, the U.S. will pay $800 billion for its oil supply, and the world as a whole will pay $3.2 trillion. These figures are both up a factor of 10 from what they were in 1999 and represent a huge regressive tax on the world economy.

Since the corn ethanol growers buy 1 unit of energy from OPEC to produce 1.3 units of energy in the form of ethanol (even by the DOE most optimistic estimates), they are part of the problem.

Corn based ethanol is just crude oil and natural gas in another form. All that happens is that a lot of water gets wasted and a a lot of fertilizer ends up where it should not be.

 

[HoosierRon]

The article blames OPEC for most of the problem..


Since the corn ethanol growers buy 1 unit of energy from OPEC to produce 1.3 units of energy in the form of ethanol (even by the DOE most optimistic estimates), they are part of the problem.

Corn based ethanol is just crude oil and natural gas in another form. All that happens is that a lot of water gets wasted and a a lot of fertilizer ends up where it should not be.

This is not correct. The one unit of "energy" mostly comes from coal and natural gas, both of which are mostly domestic energy sources. One gallon of ethanol replaces 6-7 gallons of gasoline.

 

[agman25]

This is not correct. The one unit of "energy" mostly comes from coal and natural gas, both of which are mostly domestic energy sources. One gallon of ethanol replaces 6-7 gallons of gasoline.

6-7 gallons of gas. What are you smoking. You get 30% less mileage with ethanol at point of use. Even if not a drop of gas or diesel was used to farm the corn, move it to the distillers and distribute ethanol to the pumps you would be displacing 0.7 gallon.

Both coal and natural gas can be converted in synthetic fuels directly. That gives a much higher "energy" yield without wasting a lot of resources and tying up farmlands.

 

[HoosierRon]

6-7 gallons of gas. What are you smoking. You get 30% less mileage with ethanol at point of use. Even if not a drop of gas or diesel was used to farm the corn, move it to the distillers and distribute ethanol to the pumps you would be displacing 0.7 gallon.

Both coal and natural gas can be converted in synthetic fuels directly. That gives a much higher "energy" yield without wasting a lot of resources and tying up farmlands.

Estimating the Net Energy Balance of Corn Ethanol
An Economic Research Service Report
by Hosein Shapouri, James A. Duffield and Michael S. Graboski

United States Department of Agriculture
Agricultural Economic Report Number 721
July 1995

Each gallon of ethanol produced domestically displaces 7 gallons of imported oil.
...
What really matters is that the production of ethanol can achieve a net gain in a more desirable form of energy (Department of Energy; and Anderson et al.). In other words, abundant domestic energy supplies, such as coal and natural gas, can effectively be used to convert corn into a premium liquid fuel that replaces imported petroleum. This approach reduces the energy balance issue to just looking at the energy value of the liquid fuels used in the production of corn ethanol.
...
Moreover, producing ethanol from domestic corn stocks achieves a net gain in a more desirable form of energy. Ethanol production utilizes abundant domestic energy supplies of coal and natural gas to convert corn into a premium liquid fuel that can replace petroleum imports by a factor of 7 to 1.

 

[M_RABID]

6-7 gallons of gas. What are you smoking. You get 30% less mileage with ethanol at point of use. Even if not a drop of gas or diesel was used to farm the corn, move it to the distillers and distribute ethanol to the pumps you would be displacing 0.7 gallon.

Both coal and natural gas can be converted in synthetic fuels directly. That gives a much higher "energy" yield without wasting a lot of resources and tying up farmlands.

HERE'S A STUDY FROM 1995. Technology has increased the energy gain from Ethanol since then, but the facts are the facts. Twice the energy is created in a worst-case scenerio.

Ethanol is good.

http://www.carbohydrateeconomy.org/...ch_Energy_Does_it_Take_to_Make_a_Gallon_.html

"In best-existing operations, assuming the corn is grown on the most energy efficient farms and the ethanol is produced in the most energy efficient plants, the net energy gain would be almost 58,000 BTUs for a net energy ratio of 2.09:1. Assuming state-of-the-art practices, the net energy ratio could be as much as 2.51:1. Cellulosic crops, based on current data, would have a net energy ratio of 2.62:1.

Our conclusion is that under the vast majority of conditions, the amount of energy contained in ethanol is significantly greater than the amount of energy used to make ethanol, even if the raw material used is corn."

 

[BGH]

How hard is this to understand, that the price of wheat, corn and other foods are way higher now on the chicago commodity exchange then they where before?
If you believe markets in the long term are efficient, then you believe this is the actual price of corn as determine by predicted supply and demand. And this has been a long time coming. Even before the latest oil spike, people have been pointing to potash prices indicating that food prices would also be going up significantly in the short term. Demand was artificially increased when the U.S. government mandated and began to subsidize ethanol production.

The U.S. government is now trying to influence the use of agricultural capacity. The soviet union did this and eventually there was no food left to be sold in stores.

And you can't blame opec. It's the decreasing U.S. dollar and the fact the U.S. wants to fill the strategic reserve. If the government started to sell the oil in the reserve for the summer months oil prices would drop significantly.

 

[BBDOS CV8]

Amenicans probably don't see it on their 'fair and balanced' news coverage, but this week there've been food riots across Asia and Africa due to shortages of various staple crops. No, biofuels are not the only cause. But if you have shortages due to natural disasters and climactic change, exacerbating them so the first world can buy cheap gas is probably ethically questionable.

Almost 40 countries are facing critical food shortages as world food prices soar to record levels, the United Nations warns.
The world's food supplies are rapidly dwindling due to crop failures caused by global warming, natural disasters, wars, and a trend away from farming food crops to growing biofuels and grain to feed cattle, the agency says.

The UN Food and Agriculture Organisation's global food price index reached its highest level this year, rising by more than 40 per cent, compared with 9 per cent last year.

"There is a very serious risk that there will be less people able to get access to food because of prices," FAO head Jacques Diouf said.

I don't think it's in anyone's interest to be seen as serial deniers on this. If ethanol can be made from detritus left from food or wood or organic processing I am all for it. But every pound of corn diverted so Americans can drive Silverados (or sugar so Australians can drive V8 Commodores) cheaper, increases price pressure on the remaining pool of food.

America is exporting more food to countries like Iraq because you conquered it and to the victors go the spoils. And crops have failed in large export countries like Australia due to our 8 year drought drought, which means there is more demand.

 

[LAPTOP GAMER]

I too get so sick of the media blaming Ethanol for high food prices, when in reality of the millions of cars on the road a small fraction use E 85.

 

[TORRED1]

I listen to XM while driving around for work, and everyone from Glen Beck, Mike Mcconnell, and Shan Hannity, are all spouting the same thing, ethanol bad, you hear it on the news, ect ect. But if you listen and just pull out the facts( drought conditions around the world causing higher prices, because other countrys are buying our corn and grain). And it seems like the oil companys are doing their best to put out the negative spin, I chuckle to my self every time I listen to them. The facts are their you just have to find them, Thanks hoosierRon for getting them out to us

 

[SNO]

Any time someone mixes historical information and forecasts for comparison purposes, I wonder what "facts" are being withheld.

While it's true that soybean and wheat acres are up this year, the OP fails to mention that corn acres are down. Instead, we get that 5-year history (which I can't find USDA data to support).

And March weather negatively affected 50% of the TX wheat crop and 20% of the OK and KS crops. Other states were impacted to lesser extents. So you can pretty much forget about any price relief from the 'extra' acres this year.

Finally, just look at that 13% reduction in cotton! Want to make any bets as to what crop they are growing instead? Hint: it's corn.

I've bolded a few lines of info from this USDA report:

WASHINGTON, Mar. 31, 2008 - On the heels of last year’s record-high corn production, U.S. farmers intend to plant 8 percent fewer corn acres in 2008, according to the Prospective Plantings report released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS). Producers plan to plant 86 million acres of corn this year. While 7.6 million acres less than 2007, this would still be the second-largest area since 1949.

The outlook for corn prices remains strong, thanks to increasing ethanol production and other factors. Still, favorable prices for other crops, along with crop rotation considerations and high corn input costs, are motivating some farmers to switch from corn. Iowa is expected to see the largest decrease in corn acreage, down 1 million acres from last year’s record, to 13.2 million acres. Both Indiana and Minnesota are expected to drop 800,000 acres from their record highs of last year.

Nationwide, soybean acreage is expected to jump 18 percent, to 74.8 million acres. This is an increase of 11.2 million acres from 2007 and is just 1 percent below 2006’s record high. Acreage increases are expected in nearly every state, with the largest growth in Iowa, up 1.25 million acres, and Nebraska, up 1.2 million. Increases of at least 800,000 acres are anticipated in Indiana, Minnesota and South Dakota, while Kansas, New York and Pennsylvania are expected to plant their largest soybean crops in history.

Wheat acreage is also expected to rise in 2008, up 6 percent to 63.8 million acres. Winter wheat planted area, at 46.8 million acres, is up 4 percent from last year. Expected acreage of durum wheat is up 22 percent, to 2.63 million acres.

NASS estimates 2008 cotton plantings at 9.39 million acres, 13 percent below last year. Upland cotton acreage is expected to total 9.19 million, the lowest level since 1983 and down 13 percent from last year. The largest acreage declines are expected in Arkansas, Mississippi, Tennessee and Texas.

The Prospective Plantings report provides the first official estimate of U.S. farmers’ planting intentions for 2008. NASS’s acreage estimates are based on surveys conducted during the first two weeks of March from a sample of approximately 86,000 farm operators across the United States. Prospective Plantings and all NASS reports are available online at www.nass.usda.gov

 

[chinamonty]

Can someone post the figures of how much corn is used to feed livestock and the cost differential over the last two years please. The cost changes are a very complex matrix and ever vested interest group tries to manipulate them to back up their own arguements which is fair enough. I am glad we getting figures posted but I would rather not see % ages since 50% of not much is still not much but 50% of a lot is still a lot. Both have reduced by 50% and aren't comparable. (Lies Lies and statistics)

 

[nailhead425]

After corn is used for Ethanol it can be, and in many cases is, dried and used as animal feed. The sugars used to produce Ethanol would otherwise be Methane gas (Cow and Pig farts).

Dent corn is the majority of harvested corn. The overwhelming majority.