Cars are grabbing world's grain supply

Posted: 14 July 2006

Author: Lester R. Brown

Cars, not people, will claim most of the increase in world grain consumption this year. The US Department of Agriculture projects that world grain use will grow by 20 million tons in 2006. Of this, 14 million tons will be used to produce fuel for cars in the United States, leaving only 6 million tons to satisfy the world's growing food needs.

In agricultural terms, the world appetite for automotive fuel is insatiable. The grain required to fill a 25-gallon SUV gas tank with ethanol will feed one person for a year. The grain to fill the tank every two weeks over a year will feed 26 people.

Investors are jumping on the highly profitable biofuel-bandwagon so fast that hardly a day goes by without another ethanol distillery or biodiesel refinery being announced somewhere in the world. The amount of corn used in US ethanol distilleries has tripled in five years, jumping from 18 million tons in 2001 to an estimated 55 million tons from the 2006 crop.

In some US Corn Belt states, ethanol distilleries are taking over the corn supply. In Iowa, 55 ethanol plants are operating or have been proposed. Iowa State University economist Bob Wisner observes that if all these plants are built, they would use virtually all the corn grown in Iowa. In South Dakota, a top-ten corn-growing state, ethanol distilleries are already claiming over half of the corn harvest.

With so many distilleries being built, livestock and poultry producers fear there may not be nough corn to produce meat, milk, and eggs. Andsince the United States supplies 70 per cent of world corn exports, corn-importing countries are worried about their supply.

Oil prices

Since almost everything we eat can be converted into fuel for automobiles, including wheat, corn, rice, soybeans, and sugarcane, the line between the food and energy economies is disappearing. Historically, food processorsand livestock producers that converted these farm commodities into products for supermarket shelves were the only buyers. Now there isanother group, those buying for the ethanol distilleries and biodiesel refineries that supply service stations.

As the price of oil climbs, it becomes increasingly profitable to convert farm commodities into automotive fuel, either ethanol or biodiesel. In effect, the price of oil becomes the support price for food commodities.Whenever the food value of a commodity drops below its fuel value, the market will convert it into fuel.

Crop-based fuel production is now concentrated in Brazil, the United States, and Western Europe. The United States and Brazil each produced over 4 billion gallons (16 billion litres) of ethanol in 2005. While Brazil uses sugarcane as the feedstock, US distillers use grain - mostly corn. The 55 million tons of US corn going into ethanol this year represents nearly one sixth of the country's grain harvest but will supply only 3 per cent of its automotive fuel. (For additional data, seewww.earthpolicy.org.

Brazil, the world's largest sugar producer and exporter, is now converting half of its sugar harvest into fuel ethanol. With just 10 per cent of the world's sugar harvest going into ethanol, the price of sugar has doubled. Cheap sugar may now be history.

In Europe the emphasis is on producing biodiesel. Last year the European Union (EU) produced 1.6 billion gallons of biofuels. Of this, 858 million gallons were biodiesel, produced from vegetable oil, mostly in Germany and France, and 718 million gallons were ethanol, most of it distilled from grain in France, Spain, and Germany. Margarine manufacturers, struggling to compete with subsidised biodiesel refineries, have asked the European Parliament for help.

In Asia, China and India are both building ethanol distilleries. In 2005, China converted some 2 million tons of grain - mostly corn, but also some wheat and rice - into ethanol. In India ethanol is produced largely from sugarcane. Thailand is concentrating on ethanol from cassava, while Malaysia and Indonesia are investing heavily in additional palm oil plantations and in new biodiesel refineries. Within the last year or so,Malaysia has approved 32 biodiesel refineries, but recently has suspended further licensing while it assesses the adequacy of palm oil supplies.

Investment juggernaut

The profitability of crop-based fuel production has created an investment juggernaut. With a US ethanol subsidy of 51ยข per gallon in effect until2010, and with oil priced at $70 per barrel, distilling fuel alcohol from corn promises huge profits for years to come.

In May 2005, the 100th US ethanol distillery came on line. Seven of these distilleries are being expanded. Another 34 or so are underconstruction and scores more are in the planning stages. The soaring demand for crop-based fuel is coming when world grain stocks are at thelowest level in 34 years and when there are 76 million more people to feed each year.

The US investment in biofuel production in response to runaway oil prices is spiraling out of control, threatening to draw grain away fromthe production of beef, pork, poultry, milk, and eggs. And, most seriously, the vast number of distilleries in operation, under construction, and in the planning stages threatens to reduce grain available for direct human consumption. Simply put, the stage is being set for a head-on collision between the world's 800 million affluent automobile owners and food consumers.

Given the insatiable appetite of cars for fuel, higher grain prices appear inevitable. The only question is when food prices will rise and by how much. Indeed, in recent months, wheat and corn prices have risen by one fifth.

For the 2 billion poorest people in the world, many of whom spend half or more of their income on food, rising grain prices can quickly become life threatening. The broader risk is that rising food prices could spread hunger and generate political instability in low-income countries that import grain, such as Indonesia, Egypt, Nigeria, and Mexico. This instability could in turn disrupt global economic progress. If ethanol distillery demand for grain continues its explosive growth, driving grain prices to dangerous highs, the U.S. government may have to intervene in the unfolding global conflict over food between affluent motorists and low-income consumers.

There are alternatives to using food-based fuels. For example, the equivalent of the 3 per cent gain in automotive fuel supplies from ethanol could be achieved several times over - and at a fraction of the cost - simplyby raising auto fuel efficiency standards by 20 per cent. Investing in public transport could reduce overall dependence on cars.

There are other fuel options as well. While there are no alternatives to food for people, there is an alternative source of fuel for cars, one that involves shifting to highly efficient gas-electric hybrid plug-ins. This would enable motorists to do short-distance driving, such as the daily commute, with electricity. If wind-rich countries such as the United States, China, and those in Europe invest heavily in wind farms to feed cheap electricity into the grid, cars could run primarily on wind energy, and at the gasoline equivalent of less than $1 a gallon.

Lester R. Brown is President of the Earth Policy Institute and author ofPlan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble.

Source: Earth Policy Institute Reproduced with permission. For data and additional resources click here.

Ethanol downsides

Commenting on the use of ethanol for vehicle fuel, in a recent issue of BioScience, David Pimental and Tad Patzek, wrote: Enthusiasts suggest that ethanol produced from corn and cellulosic biomass could replace much of the oil used in the United States. Yet the 18 per cent of the US corn crop that is now converted into 4.5 billion gallons of ethanol replaces only 1 per cent of US petroleum consumption. If the entire corn crop were used, it would replace only 6 per cent. And because the country has lost over a third of its agricultural topsoil, no large increase in the corn crop is possible.

Our up-to-date analysis of the 14 energy inputs that typically go into corn production and the 9 invested in fermentation and distillation operations confirms that 29 per cent more energy (derived from fossil fuels) is required to produce a gallon of corn ethanol than is contained in the ethanol.

Ethanol from cellulosic biomass is worse: With current technology, 50 percent more energy is required to produce a gallon than the product can deliver. Investigators differ over the energy value of the by-products of making corn ethanol, but the credits range only from 10 per cent to 60 per cent. In any event, biomass ethanol is a bad choice from an energy standpoint.

Moreover, the environmental impacts of corn ethanol are enormous. They include severe soil erosion, heavy use of nitrogen fertilizer and pesticides, and a significant contribution to global warming. In addition, each gallon of ethanol requires 1700 gallons of water (mostly to grow the corn) and produces 6 to 12 gallons of noxious organic effluent. Using food crops, such as corn grain, to produce ethanol also raises major ethical concerns. More than 3.7 billion humans in the world are currently malnourished, so the need for grains and other foods is critical. Growing crops to provide fuel squanders resources; better options to reduce our dependence on oil are available. Energy conservation and development of renewable energy sources, such as solar cells and solar-based methanol synthesis, should be given priority.

David Pimentel is based at the College of Agriculture and Life Sciences, Cornell University and Tad Patzek at the Department of Civil and Environmental Engineering,University of California-Berkeley. They were writing in the November 2006 issue of BioScience.