More on Ethanol and Food Prices

My recent rant on the politics and ethics behind ethanol drew some interesting flak accusing me of being an alarmist crank. After I stopped sobbing I decided to go out and see just how far into the realm of hyperbole I had travelled.

Currently, ethanol makes up a very small percentage of US fuel consumption. The US Department of Energy estimates that there are around 950 fuel stations in the entire country serving up E85 (85% ethanol/15% gasoline) as of today, with the lion’s share (around 25% of the total) being located in Minnesota. The state of California, on the other hand, has a much larger fleet of cars and has a whopping three E85 stations. There are a couple of stations near my house that advertise E85 for sale, with their cost usually being around 50 cents lower than 87-octane unleaded on any given day. Ethanol is more commonly used today as an additive to normal gasoline, with 10% being the normal amount. My point is that currently ethanol is a pretty small player on the United States liquid fuel scene. If we were to truyl embrace ethanol as the motor fuel of the future, it’s use will jump dramatically.

Even at it’s current rate of production, ethanol is having an affect on food prices, though. Tyson Foods, the largest meat processor in the world, is forecasting higher meat prices in 2007 due to rising corn prices. Hmmm…. The article explicitly states that new ethanol plants are causing demand for corn to increase, and that the costs will have to be passed on American consumers of pork, chicken and beef. To quote from the linked article:

“Quite frankly the American consumer is making a choice here. This is either
corn for feed or corn for fuel, that’s what’s causing this,” Bond said.

To be fair, we shouldn’t expect to see rising prices for food across the board at this time. Feed prices make up a larger percentage of the costs for animal products than base grain costs do for breads, cereals, etc. If more acres of farmland are converted to corn production, though, who knows what will happen. In the meantime, rising meat prices will likely make animal rights and vegetarian activists happy.

Lester Brown of the Earth Policy Institute (an admitted foe of ethanol) also makes his case:

“The lines between the food economy and the energy economy [are] becoming
blurred,” says agricultural economist Lester R. Brown, president of the Earth
Policy Institute in Washington, D.C. Last week, his organization issued an
economic analysis on the subject.

The analysis found an emerging “competition between the 800 million people who own automobiles and the 2 billion low-income people, many of whom already spend over half their income on food,” Brown says. Furthermore, he says, “taxpayers may be subsidizing a rise in their own food prices.”

One-fifth of corn and almost one sixth of the U.S. grain harvest overall goes toward ethanol production, according to the institute’s report. And while the world’s production of grain will grow by about 20 million tons this year, 70 percent of the increase could be used to generate ethanol for U.S. automobiles, Brown says.

As with any contentious issue, there are many views and opinions regarding ethanols’ impact of food costs and the world’s ability to feed itself. Even the relatively minimal impact of ethanol is having a dramatic affect on corn prices right now, and since corn is considered the only economically-viable crop for the USA at this time (switchgrass is an option, but not that popular yet), increased demand for ethanol can only negatively affect prices for food in the coming years.

Sure, my previous note’s illustration of how ethanol production will affect food prices was overly simplistic. It was intended to provoke some thought and discussion about the ethics of using food as fuel; nothing more, nothing less. So, to be clear, increased production of ethanol isn’t going to automatically mean millions of starving children around the world. It may very well mean forcing people to spend larger chunks of their money on food as meat and protein costs rise. I’m not sure that’s any better, especially when it’s primarily to keep an inherently unsustainable system of living going.

As the cost of oil continues to rise, alternative fuels like ethanol will continue to grow in importance, and we will use whatever we can to keep the system going. However, we shouldn’t kid ourselves into thinking that we’ll be able to make a 1-1 replacement of gas with ethanol without there being ramifications of one sort or another. The cheerleaders for ethanol are quick to discount the possible problems that come with the territory. So, while I may be an alarmist crank, I’d like to think I’m doing it for a good reason.

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