Biofuels and food prices: Running the numbers
Clean-energy research firm New Energy Finance has waded into the "food versus fuel" debate and finds that oil is a bigger factor in rising food prices than biofuels.
New Energy Finance, which will release its report Tuesday, also finds that changing food patterns around the world, growing population, and rising input costs, such as fertilizers, are contributing to upward pressure on food prices.
Biofuels production, too, is contributing to food price inflation, but New Energy Finance said that is "far from the dominant factor." It found that areas where biofuel productions have had a significant impact were due primarily to "overly rapid application of support schemes and protectionism."
Rising food prices have led to a sharp change in tone in the biofuels industry. In the U.S., a number of senators, including presidential candidate John McCain, have called for relaxing or suspending the ethanol mandates and subsidies that are fueling an industry boom.
There have been calls to review biofuels policies in Europe as well. In a report last month, the International Monetary Fund said biofuels, among other factors, are contributing to a food crisis.
It's clear that there are a number of factors affecting food prices. New Energy Finance, which tracks investments in clean tech, sought to quantify the relative impact of the various factors. From the report:
"In grains, during the period from 2004 to April 2008, global dollar prices increased by an average of 168 percent. The rising price of oil accounts for an increase of 32.5 percent and other inputs--such as land and labor costs--contributed 7.4 percent. Dollar depreciation accounts for a further 17.9 percent. Supply and demand imbalances account for the remaining 57.7 percent, with biofuels responsible for up to an 8.1 percent increase in global average grain prices (the impact on U.S. corn was clearly above average). The biggest issues were the failure to improve yields to compensate for global population growth, along with the failure of the Australian harvest."
In food oils, such as palm and soy, the higher price of oil contributed to 18 percent of the run-up in soy prices.
Just the beginning
Rising costs of grain have hurt biofuels producers as well. Profits in corn ethanol have shrunk, while some biodiesel plants that rely on soy have been mothballed because of the sharp uptick in soy costs.
Meanwhile, a farm bill in the U.S., already passed by Congress and vetoed by President Bush, would give a boost to biofuels makers if Congress can muster enough votes for an override. The bill would result in about $1 billion worth of research and development and subsidies for renewable liquid fuels, according to an analysis by United Press International.
Corn-based ethanol has come under fire because it does not significantly reduce carbon emissions when compared with gasoline.
Ethanol advocates, meanwhile, say that cellulosic ethanol, made from wood and agricultural wastes or even municipal garbage, is a better solution.
That technology, still experimental, will benefit from the infrastructure established by corn ethanol, they say. In a piece published earlier this week, high-profile investor Vinod Khosla struck back at a Wall Street Journal editorial on ethanol.
Given what's at stake--food and energy--the biofuels debate, hopefully informed by good analysis, is not likely to quiet down.
Martin LaMonica is a senior writer for CNET's Green Tech blog. He started at CNET News in 2002, covering IT and Web development. Before that, he was executive editor at IT publication InfoWorld. E-mail Martin. 
So instead of letting supply and demand call for additional corn production because of the increased profit of making more corn, the big farm companies just rake in cash by doing nothing... that's our tax dollars at work, and the "new look" congress wants to raise taxes to help stimulate the economy... WHOOPIE!
So instead of letting supply and demand call for additional corn production because of the increased profit of making more corn, the big farm companies just rake in cash by doing nothing... that's our tax dollars at work, and the "new look" congress wants to raise taxes to help stimulate the economy... WHOOPIE!
So instead of letting supply and demand call for additional corn production because of the increased profit of making more corn, the big farm companies just rake in cash by doing nothing... that's our tax dollars at work, and the "new look" congress wants to raise taxes to help stimulate the economy... WHOOPIE!
Ethanol has a positive energy balance.
In the past five years, ethanol plants have reduced water consumption by 26%, electricity usage by 16% and total energy use by 22%
Oil and gasoline prices would be about 15% higher, or $4.14 a gallon at today?s prices, if biofuel producers weren't increasing their output.
Making corn ethanol the scapegoat for the high price of food is unwarranted
A 10 percent gain in energy prices could contribute 5.2 percent to retail food prices.
The ethanol industry is in it?s infancy with technological advances like cellulosic feedstocks (non-corn) poised to revolutionize the marketplace and greatly improve efficiency
The overwhelming majority of U.S. corn, including exported corn, feeds livestock?not humans.
Ethanol reduces formaldehyde emissions.
Do you think the picture might look a little different after the ethanol production rate ramps up by the factor of 5 or 6 that the incentives are aiming for?
It takes years or even decades to build ethanol plants. The retrofit of distilling cellulose based materials such as switchgrass or algae is an easy retrofit for a plant. Once fermenting has occurred and solids are screened out, the wine and distilling is the same. Our choice is to keep going as we are or to move to renewable energy that we can make.
A large part of the new food shortages is from the new wealth in developing countries, and their people wanting animal protein in their diets. Farmers are diverting grain to feed animals because of the higher profits. The person who will save the world will be the person who figures how to make "peasant cakes" from spelt grains. With apologies for stealing M. Antoinette's quote.
Spelt is a kind of wheat. It is not created by adding brewer's yeast to what remains after removing starch from some grain.
Marie Antoinette never said, "Let them eat cake." The mistranslated and misattributed remark was from Maria Theresa a hundred years before. She said, "Let them eat brioche." (Brioche is not cake, nor is it bread.)
Not enough land, not nearly enough, if ethanol is economic enough to catch on. Simple math. If it's profitable, ethanol feedstocks will displace food crops until the income from each is in balance, and much more expensive than now.
The only reason food is not being taken out of production now is that ethanol is being produced in only small amounts- only about 6 percent of the gasoline volume. When it's 30 percent, the impact will be very apparent. If we try to get E85 everywhere, we'll be importing most of our food.
Oh, and thanks for the M. Antoinette image. I couldn't have thought of a nicer touch, myself. Let them eat spelt, indeed.
- by sweetnsnappy May 26, 2008 9:00 AM PDT
- The problem with any biofuel is that it still loads more CO2 into the atmosphere. Increasing corn production increases runoff into the Mississippi watershed and increases the size of the "dead zone" in the Gulf of Mexico.
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(12 Comments)Money is an abstract concept; food isn't. The only solution is to travel less, decrease the distance from which we get our basic necessities, and especially squander less. It isn't about saving the Earth--the Earth will be here regardless--it's about preserving the Earth's ability to tolerate our presence on it and it's ability to sustain us.