It doesn't have to be one or the other when we get into second-generation biofuels (algae, switchgrass, jatropha, etc). But for now, this is something that needs to be discussed. Link here.
Food and Fuel Compete for Land
By ANDREW MARTIN
Published: December 18, 2007
Shopping at a Whole Foods Market
in suburban Chicago, Meredith Estes said food prices have jumped so
much she has resorted to coupons. Charles T. Rodgers Jr., an Arkansas
cattle rancher, said normal feed rations so expensive and scarce he is
scrambling for alternatives. In Oregon, Jack Joyce, the owner of Rogue
Ales, said the cost of barley malt has soared 88 percent this year.
For years, cheap food and feed were taken for granted in the United States.
But
now the price of some foods is rising sharply, and from the corridors
of Washington to the aisles of neighborhood supermarkets, a blame alert
is under way.
Among the favorite targets is ethanol, especially
for food manufacturers and livestock farmers who seethe at government
mandates for ethanol production. The ethanol boom, they contend, is
raising corn prices, driving up the cost of producing dairy products
and meat, and causing farmers to plant so much corn as to crowd out
other crops.
The results are working their way through the
marketplace, in this view, with overall consumer grocery costs up
roughly 5 percent in a year and feed costs up more than 20 percent.
Now,
with Congress poised to adopt a new mandate that would double the
volume of ethanol made from corn, ethanol skeptics say a fateful moment
has arrived, with the nation about to commit itself to decades of
competition between food and fuel for the use of agricultural land.
“This
is like a runaway freight train,” said Scott Faber, a lobbyist for the
Grocery Manufacturers Association, who complained that ethanol has the
same “magical effect” on politicians as the tooth fairy and Santa Claus
have on children. “It’s great news for corn farmers, but terrible news
for consumers.”
But ethanol critics are not getting much traction
with their argument. Last week, the Senate voted 86 to 8 for a new
energy bill containing expanded ethanol mandates, and the House is
expected to follow suit this week.
Experts with no stake in the
argument say ethanol has indeed contributed to rising food costs, but
that is only one among several factors. Higher fuel costs are driving
up the expense of growing and transporting food. And strong economic
growth abroad is increasing demand for agricultural commodities,
allowing once-destitute people to augment their diets with meat and
dairy.
It is also a tough time, politically, to make a case
against ethanol. With continuing turmoil in the Middle East, sky-high
gas prices and presidential candidates stumping in Iowa, the heart of
the Corn Belt, a new renewable fuel standard has plenty of supporters
on Capitol Hill.
“We did get whipped,” said Jay Truitt, vice
president of government affairs for the National Cattlemen’s Beef
Association. “We continue to be caught up in this fervor, almost
spirituality, about ethanol. You can’t get anyone to consider that
there is a consequence to these actions.”
He added, “We think there will be a day when people ask, ‘Why in the world did we do this?’”
The
bill in Congress would increase the mandate for renewable fuels to a
striking 36 billion gallons by 2022. That is far beyond a requirement
on the books now for 7.5 billion gallons of ethanol by 2012.
Much
of the newly required ethanol could be made from agricultural wastes
like corn stalks and straw, and its production would not compete
directly with food production. But the proposed mandate, known as a
renewable fuel standard, also calls for 15 billion gallons of ethanol
made from grains, primarily corn.
Ethanol advocates say they believe yield increases will supply much of the extra corn needed to meet the new mandate.
Mark
W. Leonard, who raises cattle and corn in western Iowa and owns a stake
in several ethanol plants, said it was “absolutely essential” that the
government increase the mandate for ethanol, and he urged Congress to
push up the deadlines.
“This is a national security issue more
than anything else,” said Mr. Leonard, noting the nation’s dependence
on imported oil. “We need to quit sending money to people who want to
blow us up.”
When the current standard was passed as part of a 2005 energy bill, it
set off a construction binge of ethanol plants that continues,
primarily in the Corn Belt but also in places like California, Texas
and upstate New York. As new plants opened and the demand for ethanol
increased, so did corn prices.
Farmers have responded to the boom by planting more and more corn.
In fact, the amount of corn planted this year, 94 million acres, was
the most since World War II, and it produced a record crop of 13.2
billion bushels. But even with bumper crops, corn prices are expected
to climb next year.
Joe Victor, vice president for marketing for
Allendale, an agricultural research firm in the Chicago suburbs, said
Midwestern farmers would face a pleasant quandary in the spring in
deciding what to plant because wheat and soybean prices are at or near
record highs and corn prices remain bullish.
“Oh geez, they’ve
got money galore,” he said. “The Senate vote for the energy bill was a
real confidence builder for the farmer to think, ‘They are not going to
pull the rug out from underneath us.’”
The price increases for
corn have had a broad impact, both because farmers are planting more
corn and less of other crops and because livestock producers are
scrambling for feed substitutes. For instance, soybeans acreage planted
this year was about 16 percent less than in 2006.
Feed costs have
increased 25 to 30 percent in the last year, according to David
Fairfield, director of feed services at the National Grain and Feed
Association. He attributed virtually all of the increase to the demands
of the ethanol industry
One consequence of the higher feed costs
is rising competition for malt barley between livestock farmers, who
want it for feed, and brewers, who need it for beer. Mr. Joyce, the
Rogue Ales owner in Newport, Ore., said he has been forced to raise
prices to pay for the additional costs of ingredients.
Mr.
Rodgers, the Rison, Ark., rancher, said he used to feed his cattle a
mixture of corn gluten and soybean hulls. But he said he cannot get
corn gluten anymore, and the cost of soybean hulls has risen to $150 a
ton from about $105 a ton.
“I’m all for us being energy independent,” he said, but added, “it’s got to be market driven.”
The impact of ethanol on prices at the grocery store is less certain.
Grocery
prices that are measured by the Consumer Price Index increased 5.4
percent in the last year, with dairy prices up 14 percent; meats,
poultry, fish and eggs, 5.4 percent; cereal and baked products, 5.2
percent; and fruits and vegetables, 4.5 percent.
Those
increases outpaced overall inflation of 4.3 percent. Government
economists predict grocery prices will jump another 3 to 4 percent in
2008.
In a study completed in May, researchers at Iowa State University
concluded that retail food prices had already increased by $47 per
person in the previous year or so as a result of higher corn prices. If
corn prices near $4.50 a bushel next year, as many people expect, the
research suggests that retail food prices for meat will increase about
7.5 percent and egg prices will go up 13.5 percent.
But
researchers for the Renewable Fuels Association dispute that math and
contend that the link between corn prices and grocery prices is weak.
As the debate continues, one thing is certain: American shoppers are increasingly frustrated over rising prices.
“It’s
the staples, the cheeses, the milks and produce,” said Ms. Estes,
shopping at the Chicago-area Whole Foods. “It’s going up, and my
grocery bill at the end, it’s like, ‘Are you kidding me?’”
