The reverse of UN's disastrous "oil for food" program: Ethanol uses 40% of US Corn Crop

Global Food Prices Jump To Record Level Because of Higher Corn Prices – or the alternate title: Cornholing the future

From The UN FAO - corn prices were the biggest driver of this trend

There’s lot of gloom and doom being pushed, trying to link food prices to climate change by the usual howlers. As shown above, food prices surged to record levels in February despite February wheat and rice prices being essentially flat. Yet, February corn prices are up significantly even with 2010 being the 3rd largest U.S. corn crop ever. Why? Well part of the reason is that our cars now have a mandated, growing and voracious appetite for corn based ethanol.

Dr. Roger Pielke Jr. writes:

When certain information proves challenging to entrenched political or ideological commitments it can be easy for policy makers to ignore, downplay or even dismiss that information.  It is a common dynamic and knows no political boundaries.  Global Dashboard catches the Obama Administration selectively explaining the causes for increasing world food prices:

“The increase in February mostly reflected further gains in international maize prices, driven by strong demand amid tightening supplies, while prices rose marginally in the case of wheat and fell slightly in the case of rice.”

“In other words, this is mainly about corn. And who’s the biggest corn exporter in the world? The United States…And where is 40% of US corn production going this year? Ethanol, for use in US car engines.”

So here we having wailing and gnashing of teeth by the usual suspects over global food prices, and they are using this as an example of the supposed “climate change drive food prices” link. Of course there isn’t any link in this case. It’s the corn stupid.

The simple solution: stop burning food for fuel, drill for more oil, work on alternate energy system that actually might work, like thorium based nuclear power.

h/t to C3 headlines

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Wil Sappenfield

First!
Cornholing the future… Heh.

DJ

Which American company grows the most corn in the U.S., and which American company gets the most in subsidies?
How much does that company spend in lobbying each year and who do they support politically?
….They quietly announced a number of years ago that they were converting at least 10% of their cropland to corn production, because it was more profitable….
You’ll hear the GloomerDoomers wailing about how climate change is forcing the price of food up, corn included. What I don’t understand is how you can, with any intelligence at all, justify putting food in your tank, when you can’t eat oil.

Mark Wagner

I’m drilling as fast as I can!

Latitude

……..and aren’t they trying to raise it from 10% to 15% ethanol
When people start having problems with their older cars, any engine, they should sue.
Everyone raising corn is dancing to the bank, but then that was the whole idea in the first place………..

Yes, higher food prices are linked to, among other things, climate change, specifically to climate change policies — and the fear of climate change.

Even Al Gore figured this out.

Curiousgeorge

I’m not a fan of ethanol, but you should know that there are several varieties of corn specific to the end use. The corn you get for dinner is not the same as the corn you feed to cattle or chickens, and there is a specific GM variety coming on the market that is tailored for ethanol. To proclaim that we are taking food out of the mouths of people by producing corn for ethanol is simplistic at best. If you wish to refine your claim that corn produced for ethanol uses up land that would otherwise grow corn for feed or people, then I’d be ok with that. But please realize the issue is far more complex than your headline would indicate.

PaulH

Food for klunkers.

Bulldust

“The simple solution: stop burning food for fuel, drill for more oil, work on alternate energy system that actually might work, like thorium based nuclear power.”
~~~~~~~~~~~~~~~~~~~~~~~
Rational policy that, but then I am reminded of Keynes:
“There is nothing so disastrous as a rational investment policy in an irrational world.”
Sadly it is an irrational world when we have to deal with ideologically-driven politcians.

Klimawandler

In Germany the consumers just brought a halt to this insanity: http://www.spiegel.de/international/germany/0,1518,749199,00.html

Alan Simpson

I was going to say the greens/alarmists/UCS and the rest were economically illiterate, now I am not so sure. It may be a genuine effort to kill as many people as possible.
Looking at the preliminary figures of excess deaths in the UK due the Winter any sane person would question where this is heading. Sorry no link to the deaths.

There’s a big problem. Farmers and businesses invested heavily in plants, facilities and machinery for this business. You just can’t stop it and leave them hanging in the wind. Either the oil for food continues, or the government bails them out (too!).
This mess can be blamed on Bush, and all the environmentalists who originally backed the idea.

mct

If your headline was spelt correctly it would have more impact…
[Thanks, fixed. ~dbs]

Klimawandler,
Consumers can decide what they want, but in the end the government thinks it can veto consumers’s decisions and decide for them. Expect the German government not to back down.

@Curiousgeorge:
My kinfolk in the Midwest switched from growing corn for food to corn for ethanol over the last decade because that’s where the money is.
That’s not complex at all!
tw

Charles Dolci

Curiousgeorge says that we are not converting people food corn to ethanol since it is a different kind of corn.
Unfortunately, curiousgeorge, it is not quite that simple.
It may not be the same corn that people consume, but that is not the problem. It diverts labor, capital, land, water, fertilizer, etc., etc. from growing people corn and other people foods to growing ethanol and car fuel.

Layne Blanchard

Slick Willy also recently said it’s a mistake. But the EPA isn’t interested in factual data.
Sadly, this boondoggle has co-opted some conservatives also. They don’t want to shut down the cash flow to their constituency.
Remove the 15% mandate and the subsidy. Ethanol would dry up overnight.

dp

Curiousgeorge talks about corn types grown to purpose and it is true there are ethanol specific ears of corn. But the land it grows on does not know nor care the pedigree of the tasseled stalks it is producing or if a flatulent ruminant or a flatulent Buick is going to consume that corn. Fields used to grow corn for ethanol could be growing food. They cannot do both at the same time.

Steve in SC

Curiousgeorge says:
March 5, 2011 at 3:38 pm
I’m not a fan of ethanol, but you should know that there are several varieties of corn specific to the end use. The corn you get for dinner is not the same as the corn you feed to cattle or chickens, and there is a specific GM variety coming on the market that is tailored for ethanol. To proclaim that we are taking food out of the mouths of people by producing corn for ethanol is simplistic at best. If you wish to refine your claim that corn produced for ethanol uses up land that would otherwise grow corn for feed or people, then I’d be ok with that. But please realize the issue is far more complex than your headline would indicate.

George corn is in everything. Corn Syrup is used in so many things I don’t know where to start, cornstarch is used in just about as many. Doritos, corn flakes, all sorts of other cereals. Corn meal, Tortillas, all things mexican. Not to mention animal feed for chickens, beef, goats, dog food, cat food, fish food.

Economically illiterate politicians who push this garbage apparently don’t read the peer-reviewed literature,
Ethanol Fuels: Energy Balance, Economics, and Environmental Impacts Are Negative
(Natural Resources Research, Volume 12, Number 2, pp. 127-134, June 2003)
– David Pimentel

Several studies suggest that the $1.4 billion in government subsidies are encouraging the ethanol program without substantial benefits to the U.S. economy. Large ethanol industries and a few U.S. government agencies, such as the USDA, support the production of ethanol. Corn-farmers receive minimal profits. In the U.S. ethanol system, considerably more energy, including high-grade fossil fuel, is required to produce ethanol than is available in the energyethanol output. Specifically about 29% more energy is used to produce a gallon of ethanol than the energy in a gallon of ethanol. Fossil energy powers corn production and the fermentation/distillation processes. Increasing subsidized ethanol production will take more feed from livestock production, and is estimated to currently cost consumers an additional $1 billion per year. Ethanol production increases environmental degradation. Corn production causes more total soil erosion than any other crop. Also, corn production uses more insecticides, herbicides, and nitrogen fertilizers than any other crop. All these factors degrade the agricultural and natural environment and contribute to water pollution and air pollution. Increasing the cost of food and diverting human food resources to the costly inefficient production of ethanol fuel raise major ethical questions. These occur at a time when more than half of the world’s population is malnourished. The ethical priority for corn and other food crops should be for food and feed. Subsidized ethanol produced from U.S. corn is not a renewable energy source.
Food Versus Biofuels: Environmental and Economic Costs
(Human Ecology, Volume 37, Number 1, pp. 1-12, February 2009)
– David Pimentel et al.

The rapidly growing world population and rising consumption of biofuels intensify demands for both food and biofuels. This exaggerates food and fuel shortages. The use of food crops such as corn grain to produce ethanol raises major nutritional and ethical concerns. Nearly 60% of humans in the world are currently malnourished, so the need for grains and other basic foods is critical. Growing crops for fuel squanders land, water and energy resources vital for the production of food for human consumption. Using corn for ethanol increases the price of US beef, chicken, pork, eggs, breads, cereals, and milk more than 10% to 30%. In addition, Jacques Diouf, Director General of the UN Food and Agriculture Organization, reports that using food grains to produce biofuels is already causing food shortages for the poor of the world. Growing crops for biofuel not only ignores the need to reduce fossil energy and land use, but exacerbates the problem of malnourishment worldwide.

Ed Caryl

CouriousGeorge,
It’s not the type of corn, it’s ANY corn. It’s the acreage involved. If you are growing ethanol corn, you can’t grow sweet corn on the same ground. It’s crowding out other crops also.

Don Shaw

“The simple solution: stop burning food for fuel, drill for more oil, work on alternate energy system that actually might work, like thorium based nuclear power.”
AMEN.
Our energy policy is a disgrace to our intelligence.
Other side benefits include:
Massive royality and lease sale payments to our Treasury. During the Bush Admin. Such payments to the treasury represented the largest source of Treasury Revenue after income taxes. Why has Obama cut off this huge source of Federal revenue by failing to sell leases and killing royalities? It is suicidal to kill an income source.
Jobs, Jobs, Jobs. A three letter word according to the VP.
Balance of Payments
Reduce oil prices
Reduce funding to unfriendly dictators (although very little of our oil comes from the middle east we do support Chavez)
The promise of alternative green fuels is a diversion from reality especially for liquid fuels.

jorgekafkazar

“The corn you get for dinner is not the same as the corn you feed to cattle or chickens…”
And what kind of corn, pray tell, would starving people like to eat?

hotrod ( Larry L )

Boy this red herring nonsense gets old — the corn used for producing fuel ethanol (field corn) and is not “food for human consumption” it is an industrial crop like timber, alfalfa, cotton etc.
The “waste product” of ethanol production is high quality cattle feed, which is used to produce high quality protein in the form of meat. The only thing taken out of the corn used in ethanol production is the ferment-able sugars and starches, all the rest of the nutrient value is preserved and used as dried distillers grains and solids (DDGS) as animal feed, harvested for corn oil, or if in surplus and economically it can be burned as fuel to power the fuel ethanol brewing cycle. In fact the brewing process yeasts actually add to the food value of the DDGS, so you get more nutrients out than you put in as corn.
The real reason for the increased corn prices is speculators (commodity players) are bidding up the price of corn, anticipating increased demand for fuel ethanol in coming months to replace very expensive oil as mid east problems increase the uncertainty of supply for oil.
This is a predictable result of a sharp increase in any commodity price. Other commodities will also go up.
IT’s the COST of OIL Stupid!
The modern fuel ethanol industry grew up out of the oil shortages of the 1970’s because ethanol allowed them to stretch a limited supply of oil/gasoline. Fuel ethanol is a direct replacement for imported oil, and its percent of use goes up as costs of oil increase. That is a classic increase of demand for a substitute product when the item it replaces becomes cost prohibitive.
It is very simple economics, when one commodity becomes very expensive, any other commodity that depends on its use for production, or any viable replacement also increases in cost.
When high quality hard wood gets expensive and hard to get people switch to hardwood veneer products, same sort of substitution occurs with fuels.
Fuel ethanol is the most cost effective octane enhancement for gasoline blending, it allows them to use less crude oil to make a gallon of fuel, therefore as the price of oil goes up, so does demand for fuel ethanol to allow the blenders to meet minimum octane requirements at the lowest possible cost.
It is a safe bet that this years corn plantings will be going up substantially for the same reason, as increased fuel costs will improve profit margins on fuel ethanol.
The actual cost of the corn fraction of common food products is trivial, in a box of corn flakes the cost of the corn to make it is less than 10 cents, the real cost is in the packaging and shipping (oil) to get the product to the consumer.
Larry

Curiousgeorge says:
March 5, 2011 at 3:38 pm
I’m not a fan of ethanol, but you should know that there are several varieties of corn specific to the end use. The corn you get for dinner is not the same as the corn you feed to cattle or chickens, and there is a specific GM variety coming on the market that is tailored for ethanol. To proclaim that we are taking food out of the mouths of people by producing corn for ethanol is simplistic at best. If you wish to refine your claim that corn produced for ethanol uses up land that would otherwise grow corn for feed or people, then I’d be ok with that. But please realize the issue is far more complex than your headline would indicate.

Instead of corn being grown for food, corn is being grown for fuel.
or
Less corn is being grown for food because more corn is being grown for fuel.
Stated either way, I believe that that is the point.
A point on which I agree.

The last thing responsible for a rise in global food prices is climate change. The single largest factor however is U.S. Monetary policy,
QE2 Fuels a Global Fury (Mark Thornton, Ph.D. Economics)
The Federal Reserve has been busy the last three months pumping up the money supply by $300 billion dollars, with much more promised in the months ahead. Some of the results have been painfully predictable, …Higher food prices set off the revolutions in Tunisia and Egypt and the mass protests in countries like Algeria, Jordan, Yemen, Bahrain, and Iran. People in these countries buy more unprocessed foods and spend a much higher percentage of their income on food, so they have been severely impoverished by Bernanke’s QE2. Bernanke claims that monetary policy cannot change the quantity of wheat by one bushel and that higher food prices are the result of bad weather conditions in Russia and Australia. However, bad weather does not explain why the prices of virtually all food and nonfood commodities have increased substantially in recent recessionary times. This is clearly a case of too much money chasing too few goods.
Food inflation and QE2: the correlation is undeniable (International Business Times)
Experts can argue all they want about the causality relationship between food inflation and the Federal Reserve’s second round of quantitative easing (QE2). What cannot be denied, however, is the correlation. Indeed, ever since QE2 was clearly signaled by the Fed, the price of food commodities surged.
Gotta love the government.

Don Shaw

Curiousgeorge says
“The corn you get for dinner is not the same as the corn you feed to cattle or chickens, and there is a specific GM variety coming on the market that is tailored for ethanol.”
I don’t follow the logic. If the fields were not diverted to corn for ethanol, wouldn’t they be dedicated to food instead?
The argument that the corn is not suitable for food doesn’t hold. The fields would be used for food if the crazy insane ethanol mandate/subsidy did not exist.

1DandyTroll

So it has come to this? Cornholio:ing each other.
Well, however, as a sceptic, I’ve been through worse. :-()

paulsnz

I see this as another attack on people of the world, destroy the food supply, create shortages based on flawed science, devalue the money supply to to further imbalance society, pit the have’s against the have not’s and blame it on nonsense. Will all these ongoing attacks on freedom, values, progress, resources for one reason to benefit the liars and the cheats. So I say “save the humans”.

Ed Barbar

“work on alternate energy system that actually might work, like thorium based nuclear power.”
Exactly!
One of these two things has to be more disastrous: Global Warming or Nuclear Power Plants in the US. I wish the trillion dollars in stimulous money had gone to nuclear power instead of the stupid solar panels popping up at all the schools in California, and programming our kids with unproven global warming beliefs.

DJ

Curiousgeorge,
We know that there are different strains of corn, and that’s not the issue. The issue is that corn, regardless of variety, takes cropland to grow, and corn for fuel takes cropland that could otherwise be used for food production.
Even more obscene is 2 additional points lost on many…
1. If corn was used for the fuel it takes to grow the corn for fuel, cropland usage would increase from no less than 1 acre to 1.6 acres. As it is, oil is used by the system in place to generate the ethanol.
2. Ethanol is hard on an engine and requires more frequent oil changes to mitigate the effects of ethanol on lubrication oils.
#2 is, IMHO, of equal importance, because I believe that the mandated increase of ethanol concentration in fuel is a left-handed way of increasing the number of cars sold. Even if the increase is only a few percent, that’s a few percent more cars sold that translates into big dollar signs for the auto industry. Why wouldn’t they love that? It’s the equivalent of a hidden bail-out.

R. Shearer

The really sad fact is that the corn to ethanol fiasco results in increased CO2 emissions vs. gasoline from crude oil. So, along with the larger dead zone in the Gulf, increased corn prices, poorer mileage, etc., the only accomplishment is wealth transfer.

Ed Barbar

@CuriousGeorge
I don’t get it. It’s reducing cropland that could be used for grain for livestock or people food. Obviously prices are going to go up if that cropland is removed. I don’t see the complexity here at all.

Jeremy

LET THEM EAT BOURBON!

Jeff Wiita

Curiousgeorge says:
March 5, 2011 at 3:38 pm
“If you wish to refine your claim that corn produced for ethanol uses up land that would otherwise grow corn for feed or people, then I’d be ok with that.”
That’s the point, Curiousgeorge. If government was not subsidizing ethanol, then farmers would be using their land to grow corn for feed or people, not ethanol. The type of corn is irrelevant. One does not have to have a degree in Economics to understand how government distorts a free market.

Tom in Texas

“I’m drilling as fast as I can!”
And I’m backing you. Long CVX, RDS, and BEXP (Austin in Bakken).
All are great hedges against rising gasoline prices.

Al Gore's Holy Hologram

Alternatively created a genetically modified supercrop for Ethanol production that isn’t for any human or animal consumption and is separated from international food markets.

Curiousgeorge at March 5, 2011 at 3:38 pm
I’m not a fan of ethanol, but you should know that there are several varieties of corn specific to the end use. The corn you get for dinner is not the same as the corn you feed to cattle or chickens, and there is a specific GM variety coming on the market that is tailored for ethanol. To proclaim that we are taking food out of the mouths of people by producing corn for ethanol is simplistic at best. If you wish to refine your claim that corn produced for ethanol uses up land that would otherwise grow corn for feed or people, then I’d be ok with that. But please realize the issue is far more complex than your headline would indicate.
You are merely splitting hair, and your second last sentence suggests that even you recognize that. A long time ago (at least as long ago as 1999 – and probably even before that if one were to sift carefully through Adam Smith’s tome) it was recognized that if there is a new demand for a product of the land then it would, if anything, increase food prices. The higher the prices paid for this new product, the greater the shift of resources toward making that product rather than food. It doesn’t make a difference whether the product is edible either to man or any other species.
As noted in Wishful Thinking on Cellulosic Ethanol :

The theory is that cellulosic ethanol, which is still in the research and development phase, would be produced from non-edible plant material, e.g., switchgrasses, crop residue and other biomass that is not currently grown or used as edible crops. Thus, it is implied, it would have no effect on food prices.
But this is wishful thinking.
If cellulosic ethanol is indeed proven to be viable (with or without subsidies), what do people think farmers will do?
Farmers will do what they’ve always done: they’ll produce the necessary biomass that would be converted to ethanol more efficiently. In fact, they’ll start cultivating the cellulose as a crop (or crops). They have had 10,000 years of practice perfecting their techniques. They’ll use their usual bag of tricks to enhance the yields of the biomass in question: they’ll divert land and water to grow these brand new crops. They’ll fertilize with nitrogen and use pesticides. The Monsantos of the world — or their competitors, the start-ups — will develop new and genetically modified but improved seeds that will increase the farmer’s productivity and profits. And if cellulosic ethanol proves to be as profitable as its backers hope, farmers will divert even more land and water to producing the cellulose instead of food. All this means we’ll be more or less back to where we were. Food will once again be competing with fuel. And land and water will be diverted from the rest of nature to meet the human demand for fuel. .

The logic is the same whether biofuels are made from sweetcorn, feed corn, cellulose, a special GM variety, or whatever. Of course, what is true for land and water is also true for all the other resources that are inputs for production, namely, capital (both financial and human). But, to continue to quote from that blog:

Does this mean that biomass – and farmers — should play no role in helping us meet our energy needs? Not necessarily. If farmers can profitably grow fuel rather than food through their own efforts, so be it. But we shouldn’t favor growing one over the other either through subsidies or indirectly through government mandates for so-called renewable fuels. And if anything should be subsidized or mandated, it shouldn’t be growing fuels. That would inevitably compete with food.

Events certainly seem to vindicate this prognostication.

Curiousgeorge says:
March 5, 2011 at 3:38 pm

I’m not a fan of ethanol, but you should know that there are several varieties of corn specific to the end use…. But please realize the issue is far more complex than your headline would indicate.

Granted, not all of the 40% of the U.S.corn crop that is used for ethanol production is from cropland that is so diverted, but a lot of it is, and world corn-price trends have been impacted by ethanol demand.
For example, Mexicans on low incomes now can no longer afford tortilla’s, their main staple that they used to buy by the kg, but must now eat Ichi Ban noodles instead. I bet that the bakeries producing the tortillas feel the pinch as well.
The corn used to produce a tank-full of fuel could be used to feed a family of four for a whole year.

lenbilen

The federal moonshiners outdid themselves
For food in the store disappears from the shelves.
We stop exporting corn
And the hungry world scorn.
Soon we cannot supply food to ourselves.

Gaylon

Looks like there are actually politicians out there (Germany) that have there heads and facts screwed on straight. Nice to read, thanks:
Klimawandler says:
March 5, 2011 at 3:46 pm
“In Germany the consumers just brought a halt to this insanity: http://www.spiegel.de/international/germany/0,1518,749199,00.html
If only we could get some of those here in the USA…

Peter

Curiousgeorge????? Far more complex?????? Farmer has land which is suited to corn production. Farmer makes planting decision based upon revenue yield. Corn for ethanol yields more $$ than corn for food. Result: Less corn for food and thus higher price.
You may find this complex, most people don’t.

hunter

Short corn.
The inevitable outcome of this is the collapse of corn prices and a whole lot of farms going on the foreclosure list.
Thanks, crony capitalists.

Mike says:
“Wheat prices have not been flat.”
It’s the substitution effect. When one commodity becomes expensive, people purchase another commodity with essentially the same utility. This drives up the price of the substitute.
Ethanol is driving up the cost of food across the board.
What is realy important is to constantly let people know who is directly responsible for this global economic fiasco and the price rise in essential commodities and energy: “Green” politicians like Obama and the Democrat Party, which is owned and operated by the enviro crowd. Because we know they will try to blame everyone else for their failed policies.

C.M. Carmichael

We need a website with impact of ” wattsupwiththat” to take the “fossil” out of fossil fuels, once and for all. The idea that carbon based fuels are finite and rapidly dwindling is ridiculous, untill we know where it comes from and how it formed. We don’t need to starve the world to make fuel, but we are.

ruddyduck

Curiousgeorge- it is more complicated, but every strand of this situation leads back to Cargill and ADM. Corn farmers and refineries collect rents from every driver because we’re forced to use not just ethanol but bioethanol. Plus the Corn Gang enjoys tariffs on cheap Brazillan ethanol and a quota on sugar so their other product, corn syrup, can collect higher profits. This is welfare for the rich.
The Corn Gang is so entrenched there is little hope the politicians will ever free us from the Corn Scheme. I hope we can drive the change from the bottom up before more of the world’s poor are harmed by rising corn prices.
Ethanol- the Fuel Worth Starving For!

ew-3

This is easily the most idiotic thing I have ever heard of.
So when we get a major flood in the corn belt that some are predicting due to the snowy winter, we are going to be short on both food AND gasoline. BRILLIANT.
And today the administration announce it was going to appeal a court decision that forced them to get the permit process for drilling in the Caribbean. They are trying to shut down as many sources of energy as they can. They are strangling the country.

Ken S

Simple solution, all grain exported outside of the US should be in exchange for crude oil.
Make this the law of the land and set the required exchange rate at one bushel of grain for each 100 barrels of crude, no exception/s f0r any reason!

P.Laini

Perfect. But in respect to the general surge of food prices, the principal factor is inflation caused by the huge increase of money supplies. And who is printing all of this money?…
Peter Schiff explains that very well, just at the beginning of the program 20110216 at http://www.schiffradio.com/
To understand real economy, and to be vaccinated against the keynesian delirium:
http://LearnAustrianEconomics.com