Driving the Poor to Starve

“How Biofuels Could Starve the Poor" C. Ford Runge and Benjamin Senauer ,Foreign Affairs May/June 2007

C. Ford Runge is Distinguished McKnight University Professor of Applied Economics and Law and Director of the Center for International Food and Agricultural Policy at the University of Minnesota. Benjamin Senauer is Professor of Applied Economics and Co-director of the Food Industry Center at the University of Minnesota. If you read nothing else about ethanol - read this.

The authors demonstrate how Washington's fixation on corn-based ethanol has distorted the national agenda and diverted its attention from developing a broad and balanced strategy to energy independence.

Because of current high oil prices and hefty production subsidies, corn-based ethanol is promoted as a major step in increasing national energy independence in the US. Reliance on high input corn crops drives up prices (corn peaked Feb US$4.37 a bushel, trading today US$3.90 dropped 4% in last 4 weeks) and pushes up grain prices worldwide - the price of grain fed protein sources, poultry, pigs and beef is shooting up as well as secondary markets such as milk and eggs. A bad, cold, wet spring has delayed planting and with 40 million acres of corn to plant in the weeks ahead reduced yields could push prices up further gain later in the year.

Filling the 25-gallon tank of an SUV in the US with pure ethanol would require over 450 pounds of corn -- which contains enough calories to feed one person for a year. It requires a US$13 Federal subsidy to the ethanol refiner, protected by a 51 cents a gallon tariff barrier - if the entire corn crop in the United States were used to make ethanol, that fuel would replace only 12 % of current U.S. gasoline use.

Direct subsidies to corn growers of the mid-west were $8.9 billion in 2005 - which will fall as producer prices soar.

2.1 billion bushels of corn grown 78 million acres produced ethanol at 106 plants nationwide this is expected to grow to 3.5 billion bushels ( U.S. Department of Agriculture showed 15 percent more corn planted than 2006, some 90.4 million acres) this year as corn output jumps to benefit from the US$4 a bushel price ( US$2 only 2 years ago). Farmland devoted to other crops is also being diverted. Cotton acreage this year in the US will drop 14 % on 2006, according to the National Cotton Council. Soybeans, wheat, barley, oats and alfalfa are also being displaced.

The biofuel industry has long been dominated not by market forces but by politics and the interests of a few large companies. In the United States, at least, corn and soybeans have been used as primary inputs for many years thanks in large part to the lobbying efforts of corn and soybean growers and Archer Daniels Midland Company (ADM), currently the biggest ethanol producer in the U.S. market.

ADM started making ethanol and other products resulting from the wet-milling of corn in the 1970's , such as high fructose corn syrup and grew to be a major player in the feed market and key force in driving ethanol use. By 1980, ADM's ethanol production had reached 175 million gallons per year, and resultant high fructose corn syrups had become a ubiquitous sweetening agent (and alternative to much criticised raw sugars) in processed foods. ByIn 2006, made just over 1 Bn gallons of ethanol and was the major US producer 4 times the size of , VeraSun Energy (as corn cost rose Vera Sun posted a loss after in Q1 2007). Last year they planned to increase investment in ethanol from $700 million to $1.2 billion in 2008 and increase production by 50%, or close to 500 million gallons, by 2009.

Legislators such as Vice President Hubert Humphrey the Minnesota senator promoted special subsidies , as did Bob Dole (R-Kans.) - critics have pointed out that nearly half of ADM's profits have come from products that the U.S. government has subsidized or protected.

Now protection has gone down the food chain and the 51 cents a gallon subsidy is augmented by a further 10 centsa gallon tax reduction on the first 15 million gallons produced. Many states (Indiana is notable) also provide all sorts of tax breaks on new built plants.

The poor are faced not only with higher energy costs but a resultant rise in food costs - none more dramatically recently than in Mexico earlier this year who import 80% of their corn from the US .Late 2006, the price of tortilla flour doubled . mexican tortillas are made of home grown white corn and the price rose as feed producers swapped supplies from US$4 a bushel corn to cheaper white corn - speculation and hoarding pushed prices even higher.

With about half of Mexico's 107 million people living in poverty and relying on tortillas as a main source of calories, the public outcry was fierce with food riots erupting. In January this year , Mexico's new president, Felipe Calderón, was forced to cap the prices of corn products.

Mark Rosegrant, a director of The International Food Policy Research Institute, in Washington, D.C., projects that given continued high oil prices, the rapid increase in global biofuel production will push global corn prices up by 20 percent by 2010 and 41 percent by 2020. The IFPR calculate that ...

The price of oilseeds, (soybeans, rapeseeds,sunflower )to rise 26% by 2010 and 76% by 2020
Wheat prices by 11 % by 2010 and 30 % by 2020 (which probably undersestimates Australian and Indian drougths this year and rising demand in Egypt)

In the poorest parts of sub-Saharan Africa, Asia, and Latin America, where cassava is a staple (and is being tested as an ethanol crop) , its price is expected to increase by 33 percent by 2010 and 135 percent by 2020.

The United Nations Millennium Development Goals of 2000 to halve the world's chronically underfed population from 16% in 1990 to 8% in 2015 will never be met as biofuels use supplant food use and world hunger grows. There is only one result when you spend 50-80% of household income on food and the staple crops double in price.

Of course the drive for food based fuels rests on a hidden but unwelcome truth - ethanol is neither fuel efficient nor environmentally friendly - Argonne National Laboratory and the National Renewable Energy Laboratory have calculated that the net energy ratio of gasoline is 0.81, a result that implies an input larger than the output. Corn-based ethanol has a ratio that ranges between 1.25 and 1.35, which is better than breaking even. Petroleum diesel has an energy ratio of 0.83, compared with that of biodiesel made from soybean oil, which ranges from 1.93 to 3.21. (Biodiesel produced from other fats and oils, such as restaurant grease, may be more energy efficient.)

Comaring biofuels gasoline such as greenhouse gas emissions shows that the complete cycle of the production and use of corn-based ethanol releases less greenhouse gases than does that of gasoline, but only by 12 to 26 %. The production and use of biodiesel emits 41 to 78 percent less such gases than do the production and use of petroleum-based diesel fuels.

Even worse is relative fuel efficiency. Using gasoline blends with 10 percent corn-based ethanol instead of pure gasoline lowers emissions by 2 percent. If the blend is 85 percent ethanol (which only flexible-fuel vehicles can run on), greenhouse gas emissions fall further: by 23 percent if the ethanol is corn-based and by 64 percent if it is cellulose-based. Likewise, diesel containing 2 percent biodiesel emits 1.6 percent less greenhouse gases than does petroleum diesel, whereas blends with 20 percent biodiesel emit 16 percent less, and pure biodiesel (also for use only in special vehicles) emits 78 percent less. On the other hand, biodiesel can increase emissions of nitrogen oxide, which contributes to air pollution. In short, the "green" virtues of ethanol and biodiesel are modest when these fuels are made from corn and soybeans, which are energy-intensive, highly polluting row crops.

Ethanol made entirely from cellulose fibre from wood by product, special grasses, field crop residues has an energy ratio between 5 and 6 and emits 82 to 85 percent less greenhouse gases than does gasoline. As corn grows scarcer and more expensive, enzyme technology is improving (To learn more search through this site for Novozymes) and novel closed cycle gasification technologies offfer a promising source of biofuel in the future but significant industrial scale production is at least a decade away. Key technologies are currently not owned by US companies.

Some of the problems are simply logistical one calculation shows that fueling an ethanol plant with switchgrass, a much-discussed alternative, would require delivering a semitrailer truckload of the grass every six minutes, 24 hours a day.... every day.

If you want to drive ... someone somewhere will starve.

Two billion people suffer from hunger daily. The struggle against hunger is made harder as agrifuels for the rich supplant food crops for the hungry. Hunger is a universal scourge - the rapid transformation of agriculture to feed the apparently insatiable and irrational demand for fuels will drive food prices, impact on water resource, adding even more pressures to the overpopulated and underfed.

There is a choice.