Like it or not this is what the ethanol industry has to contend with as food prices rise.
March 3, 2008
Priced Out of the Market
New York Times
The world?s food situation is bleak, and shortsighted policies in the United States and other wealthy countries ? which are diverting crops to environmentally dubious biofuels ? bear much of the blame.
According to the United Nations Food and Agriculture Organization, the price of wheat is more than 80 percent higher than a year ago, and corn prices are up by a quarter. Global cereal stocks have fallen to their lowest level since 1982.
As usual, the brunt is falling disproportionately on the poor. The F.A.O. estimates that the cereal import bill of the neediest countries will increase by a third for the second year in a row. Prices have gone so high that the World Food Program, which aims to feed 73 million people this year, said it might have to reduce rations or the number of people it will help.
The world has faced periodic bouts when it looked as if population growth would outstrip the food supply. Each time, food production has grown to meet demand. This time it might not be so easy.
Population growth and economic progress are part of the problem. Consumption of meat and other high-quality foods ?mainly in China and India? has boosted demand for grain for animal feed. Poor harvests due to bad weather in this country and elsewhere have contributed. High energy prices are adding to the pressures.
Yet the most important reason for the price shock is the rich world?s subsidized appetite for biofuels. In the United States, 14 percent of the corn crop was used to produce ethanol in 2006 ? a share expected to reach 30 percent by 2010. This is also cutting into production of staples like soybeans, as farmers take advantage of generous subsidies and switch crops to corn for fuel.
The benefits of this strategy are dubious. A study by the Organization for Economic Cooperation and Development suggested that ? absent new technologies ? the United States, Canada and the European Union would require between 30 percent and 70 percent of their current crop area if they were to replace 10 percent of their transport fuel consumption with biofuels. And two recent studies suggested that a large-scale effort across the world to grow crops for biofuels would add carbon dioxide to the atmosphere rather than reduce it.
The human costs of this diversion of food into energy are all too evident.
As a first step, the United States and other wealthy countries that are driving this problem must ensure that the United Nations and other relief agencies get the support they need to feed the most vulnerable people. But aid is not a solution.
Congress must take a hard look at the effect of corn ethanol on food supplies in the same way the new energy bill requires it to review the environmental effects. It must move toward ending subsidies that will become even more difficult to justify as oil prices rise and the costs of producing corn ethanol decline. And it must press other wealthy countries to do the same before hunger turns to mass starvation.