Food vs. Fuel – Talking Points (from EPIC)
April 23, 2008
Global Issues
We live in a global economy where an extensive assortment of interrelated factors drives supply and demand and ultimately the price of food. Drought, population growth, growing protein demand in developing countries, war, transportation costs, crop acreage shifts, and many other factors affect food prices and supplies. The factors behind rising food prices and shortages will never be completely eradicated.
These same issues also contribute to the need for more arable acres. Tropical forests have been cleared for hundreds of years due to population growth in developing countries that need to feed themselves.
In the RFS, Congress established a production cap of 15 billion gallons of corn ethanol by 2015 to help guard against dramatic land use changes. Many critics are basing their negative projections on a model in which U.S. corn ethanol production increased from 15 billion gallons a year to 30 billion gallons a year by 2015.
In 2007, U.S. corn growers planted over 90 million acres of corn, which is the largest crop in over 60 years. Most importantly, each need of a very diverse corn market was once again met: food, exports and energy. Corn did not go toward fuel at the expense of food.
Unlike conventional (grain based) ethanol, cellulosic ethanol is made from cellulosic biomass materials such as corn stover, cereal straws, sugarcane, bagasse (a sugar cane byproduct), sawdust, paper pulp, small diameter trees and dedicated energy crops such as switchgrass. Cellulosic biomass is the most abundant organic material on earth.
Ethanol production uses only the starch portion of the corn kernel. The remaining protein, fat, fiber and minerals are used in high value livestock feed (DDGS).
Field corn used in ethanol is not the same variety of corn used for human consumption. Food grade corn is sweet corn and makes up 5 - 8 percent of the total corn usage. The demand for food grade corn has remained flat for the last 15 years.
The United States spends roughly one billion dollars a day on imported oil. A fraction of these funds would more than make up for the shortfall in the World Food Program.
We can look to increased labor, packaging and fuel costs, rising wealth and grain demand in China and India and drought in Australia for playing roles in increased food prices. The impact of ethanol upon food prices is minimal.
The United States is the largest donor of food aid, feeding one of every two recipients around the globe. Hunger is indeed a world wide calamity, and it is distressing to think that rising food prices have impacted the budgets of humanitarian organizations around the globe.
Ethanol Efficiency Improvements
Biotechnology and improved production practices continue to improve the efficiency of the individual corn plant. Increased corn yields are the trend. In 2004, a record was set with 160.4 bushels per acre of corn produced. A 15 year trend demonstrates average yields are projected to hit 173 bushels per acre by 2015.
According to recent research published by Argonne National Laboratory, the U.S. ethanol industry has seen efficiency improvements since 2001.
Water consumption is down 26.6%.
Grid electricity usage is down 15.7%.
Total energy use is down 21.8%.
These improvements underscore the ethanol industry’s commitment to evolution. The goal is to continue to improve domestic energy production. This is also demonstrated by the industry’s dedication to cellulosic ethanol research.
Ethanol is a stepping stone to a future of energy independence in the United States. The industry continues to evolve and improve.
Domestic Price Increases
Record high fuel prices are the biggest factor related to food prices. The cost of transporting the food we eat across the country has skyrocketed and we’re seeing it in the checkout lane.
Without ethanol, gasoline would cost as much as 14.6 percent more at the pump.
Oil prices are affecting farmers’ costs of production, return on investment and ultimately, what they’ll plant. Diesel fuel prices are 35 to 40 percent higher than last year and driving up other crop input costs.
According to a study by Texas A & M University, the underlying force driving changes in the agriculture industry, and the economy as a whole, is overall higher energy costs, evidenced by oil prices at more than $ 100 a barrel.
According to a study conducted by John Urbanchuk of LECG, LLC, rising petroleum prices have about twice the impact on food prices as equivalent increases in corn prices. A 33 percent increase in crude oil prices – the equivalent of $1.00 per gallon over current levels of retail gasoline prices – would increase retail food prices measured by the Consumer Price Index for food by 0.6 to 0.9 percent. An equivalent increase in corn prices – about $1.00 per bushel over current levels – would increase consumer food prices only 0.3 percent.
The current favorable cost of corn means the federal government is actually paying out considerably less in subsidies – estimates range between a $8 and $12 billion savings.
Land Use
Changes are underway at all levels of the renewable fuels industry to increase productivity and improve the industry’s already green footprint. Improving yield per acre would require expanding into fewer arable acres.
Agriculture is a major force in the effort to increase productivity in biofuels, employing biotechnology and sustainable production methods that optimize use of land, nutrients and water.
Biotechnology traits within corn and soybean varieties adopted between 1996 and 2006 have seen corn yields increase 30 percent and soybean yields increase 22 percent. Estimates by Jens Riese with McKinsey & Co indicated that continuing the industry 1.8 percent annual increase in corn yield would be sufficient to meet the 2007 Renewable Fuel Standard for corn ethanol production – 15 billion gallons in 2022.
Jefferson City
That was the main summary point of a USDA press briefing held Monday in Washington DC to present their case for producing both food and fuel in the United States.
