Corn-based ethanol may starve the world's poor

i-fd0ccf4a7ac08a5fd881e76c90e7498f-Grilled Corn.jpgC. Ford Runge and Benjamin Senauer, writing in Foriegn Affairs, summarize the likely effects of corn-based biofuels on the world food supply. Take home message: the biofuel craze has led to skyrocketing food prices which -- along with government subsidies and tariff protections to domestic corn producers -- has the potential to starve the poorest in the world.

Money quote:

Now, thanks to a combination of high oil prices and even more generous government subsidies, corn-based ethanol has become the rage. There were 110 ethanol refineries in operation in the United States at the end of 2006, according to the Renewable Fuels Association. Many were being expanded, and another 73 were under construction. When these projects are completed, by the end of 2008, the United States' ethanol production capacity will reach an estimated 11.4 billion gallons per year. In his latest State of the Union address, President George W. Bush called on the country to produce 35 billion gallons of renewable fuel a year by 2017, nearly five times the level currently mandated.

The push for ethanol and other biofuels has spawned an industry that depends on billions of dollars of taxpayer subsidies, and not only in the United States. In 2005, global ethanol production was 9.66 billion gallons, of which Brazil produced 45.2 percent (from sugar cane) and the United States 44.5 percent (from corn). Global production of biodiesel (most of it in Europe), made from oilseeds, was almost one billion gallons.

The industry's growth has meant that a larger and larger share of corn production is being used to feed the huge mills that produce ethanol. According to some estimates, ethanol plants will burn up to half of U.S. domestic corn supplies within a few years. Ethanol demand will bring 2007 inventories of corn to their lowest levels since 1995 (a drought year), even though 2006 yielded the third-largest corn crop on record. Iowa may soon become a net corn importer.

The enormous volume of corn required by the ethanol industry is sending shock waves through the food system. (The United States accounts for some 40 percent of the world's total corn production and over half of all corn exports.) In March 2007, corn futures rose to over $4.38 a bushel, the highest level in ten years. Wheat and rice prices have also surged to decade highs, because even as those grains are increasingly being used as substitutes for corn, farmers are planting more acres with corn and fewer acres with other crops.

This might sound like nirvana to corn producers, but it is hardly that for consumers, especially in poor developing countries, who will be hit with a double shock if both food prices and oil prices stay high. The World Bank has estimated that in 2001, 2.7 billion people in the world were living on the equivalent of less than $2 a day; to them, even marginal increases in the cost of staple grains could be devastating. Filling the 25-gallon tank of an SUV with pure ethanol requires over 450 pounds of corn -- which contains enough calories to feed one person for a year. By putting pressure on global supplies of edible crops, the surge in ethanol production will translate into higher prices for both processed and staple foods around the world. Biofuels have tied oil and food prices together in ways that could profoundly upset the relationships between food producers, consumers, and nations in the years ahead, with potentially devastating implications for both global poverty and food security.

You know there is a really easy way to solve this whole problem of rising food prices: end all agricultural subsidies and tariffs. This will have two effects. 1) It will immediately reduce food prices for everyone, not just Americans, because food production will move to places where food production is cheapest. 2) It will solve rather than exacerbate the world's poverty problem because it would invigorate domestic industry in the world's poorest nations.

We could kill two birds with one stone.

Technological improvements with respect to cellulosic ethanol will undoubtedly improve ethanol's credibility as a green fuel, but we can avert this train wreck this second by allowing for a rational agricultural market. In a rational agricultural market we would let comparative advantage work its wonders, and American consumers and poor farmer in developing countries would both be the beneficiaries.

However, I think Ronald Bailey summarizes quite aptly why that is unlikely to happen: "the world's poor do not participate in Iowa's presidential caucuses."

Hat-tip: Reason.

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Not to make light of it, but starving the world's poor is only one of the serious problems with a rush to biofuels. Agricultural production is the single largest contributor to habitat destruction, and turning to agriculture (at least as presently practiced) to feed our addiction to energy will only exacerbate this problem.

By bob koepp (not verified) on 26 Jun 2007 #permalink

The food crop based ethanol juggernaut seems unstoppable. A perfect (political) storm is feeding it.

(1) Farmers are for it big, time.

(2) The auto-companies can greenwash their images by making flex-fuel vehicles.

(3) The auto and oil companies can stave off fuel economy standards by pretending that an oil substitute is just around the corner.

No politician dare go against this tide.

It's like they're trying to destroy the good idea of biofuels by placing endless impediments to making them efficient. The obvious answer is to use sugarbeet, like the Brazilians. The habitat destruction will still be a challenge, but the current system which seems to be designed only to enrich ADM is idiotic. Making ethanol from corn requires twice as much energy input as it does from sugar - readily available from crops like sugar beet and sugarcane.

It's just this kind of half-assed, pro-corporate approach that will ensure sound environmental policies will never be implemented properly. Even so, bioethanol could only ever be used to offset some of the fuel needs - not replace oil, but with an emphasis in improving CAFE standards and making more efficient vehicles the combined effects could do a great deal to get us off the foreign oil.

MarkH- the cost of global warming is not well understood at all, and may be natural and unstoppable anyway (after all, we are just coming out of an ice age). The problem of poverty is very real and the costs are great and immediate for a lot of people.

I don't have problems with government subsidies - if they're for useful things, like sugarbeet, wind and solar, and renewable energy research. What a waste of time. Finally the public seems to kind of be on board with taking action on the global warming issue, and now someone has to explain to everyone that, oops, wait, we screwed this up.

MarkH -

I would disagree with biofuels being a great idea; even at best you are expanding the area under agriculture greatly, with associated habitat destruction.

Renee -

Given that the earth reached peak post glaciation temperatures approxamately 6000 years ago, can you cite any references to support your assertion?

By Andrew Dodds (not verified) on 26 Jun 2007 #permalink

Personally, I think this is all barking up the wrong tree. Yes, renewable fuel sources would be nice, but the proper goal is to slash energy use in America by a factor of fifty to a hundred. That would put us merely five to ten times above the average world consumption, rather than five hundred times above.

But try to tell your average American that and he'll rebel. Even Europeans, who are many times more efficient than Americans, are likely to be a bit miffed.

Nobody seems to be pointing out one obvious reason to push ethanol: buying down the mountain of surplus corn produced in the Midwest, which even Cargill and the other giants cannot eat up by turning it into corn syrup for soft drinks. Nobody is seriously debating sugar cane as an alternative, because American farmer's don't grow that crop.

Dirk Hanson
http://addiction-dirkh.blogspot.com/

Does anyone really believe that the ethanol kick is really going to get us off Opec oil , brought to us by US corporations . They are not investing in it . Gov't knows this is just a panacea , an opiate for the masses . So we can look green . And poor . Billions spent on alt fuel instead of Oil security in the mid east , would get us off OPEC oil . Oil will never be in the background until it is all gone . Just as the US auto industry is shortsighted and stubborn about mileage requirements , current system loves Oil , like a junkie and it will be preeminent . The investment community will have to push other sources of energy , its obvious current administration will not . What fool uses his food supply , and the excess for the rest of world for fuel ?

Bill

And I clicked here thinking the title read, "Corn-based ethanol may save the world's poor." *sigh* It's been a long day.

and may be natural and unstoppable anyway (after all, we are just coming out of an ice age).

OK, I'm a paleontologist who can't tell last week from last ice age. I can tell last ice age from now, though. The end of the last ice age is over, and has been for some 10,000 years.

And the current sharp rise only started 100 years ago. Don't you know anything?

By David Marjanovi? (not verified) on 28 Jun 2007 #permalink

As soon as researchers lick the cellulose-processing problem, and are able to cost-effectively process cornstalks, leaves --as well as the agricultural detritus of other plants--yes, it's estimated that biofuels can indeed make a major impact on our OPEC addiction. That said, though, researchers have no idea how long it will take to crack this problem, and until they do, biofuels will always be a niche-fuel with negligible impact.

By gary l. day (not verified) on 09 Jul 2007 #permalink