Food vs. fuel

Food vs fuel concerns the competition between food and fuel on a global scale. Biofuel production has increased in recent years. Some commodities like maize or vegetable oil can be used either as food or to make fuel. Land that was also formerly used to grow other crops is now used to grow maize for biofuels. With global demand for biofuels on the increase many natural habitats are also being converted into farmland. This is a recent phenomenon and is considered to be one of the primary causes of 2007–2008 world food price crisis. Others consider biofuels a way to fight world hunger, which is caused by poverty and inequity, not by an absolute shortage of food.

The "food vs. fuel" debate

This topic is internationally controversial, with good-and-valid arguments on all sides of this ongoing debate. There is disagreement about how significant this is, what is causing it, what the impact is, and what can or should be done about it.

The World Bank states that "the grain required to fill the tank of a sports utility vehicle with ethanol ... could feed one person for a year."

Food price inflation

From 1974 to 2005 real food prices (adjusted for inflation) dropped by 75% (1/4th the price). With this history, recent rapid food price increases are extraordinary. It has been said about the world food crisis that, "This is the world's big story."

Corn is used to make ethanol and prices went up by a factor of 3 in less than 3 years (measured in US dollars). Reports in 2007 linked stories as diverse as food riots in Mexico due to rising prices of corn for tortillas, and reduced profits at Heineken the large international brewer, to the increasing use of corn (maize) grown in the US Midwest for ethanol production. (In the case of beer, the barley area was cut in order to increase corn production. Barley is not currently used to produce ethanol.) Wheat is up by almost a factor of 3 in 3 years (measured in US dollars). Soybeans are up by a factor of 2 in 2 years (measured in US dollars).

As corn is commonly used as feed for livestock, higher corn prices lead to higher prices in Animal source foods. Vegetable oil is used to make biodiesel and has about doubled in price in the last couple years. The price is roughly tracking crude oil prices. The 2007–2008 world food price crisis is blamed partly on the increased demand for biofuels.

Proposed causes

Factors other than food or fuel

That food prices went up at the same time fuel prices went up is not surprising and should not be entirely blamed on biofuels. Energy costs are a significant cost for fertilizer, farming, and food distribution. Also, China and other countries have had significant increases in their imports as their economies have grown. Sugar is one of the main feedstocks for ethanol and prices are down from 2 years ago. Part of the food price increase for international food commodities measured in US dollars is due to the dollar being devalued. Protectionism is also an important contributor to price increases. 36% of world grain goes as fodder to feed animals, rather than people.

Over long time periods population growth and climate change could cause food prices to go up. However, these factors have been around for many years and food prices have jumped up in the last 3 years, so their contribution to the current problem is minimal.

Governments distorting food and fuel markets

France, Germany, The United Kingdom and The United States governments have supported biofuels with tax breaks, mandated use, and subsidies. This is diverting resources from food production and leading to surging food prices and the destruction of natural habitats. Current government policies cause distortions of supply and demand. Without government involvement the move to biofuels would not be so drastic and food prices would not have gone up so much.

Fuel for agricultural use often does not have fuel taxes (farmers get duty free gas). Biofuels may have subsidies and low/no retail fuel taxes. Biofuels compete with retail gasoline and diesel prices which have substantial taxes included. The net result is that it is possible for a farmer to use more than a gallon of fuel to make a gallon of biofuel and still make a profit. Some argue that this is a bad distortion of the market. There have been thousands of scholarly papers analyzing how much energy goes into making ethanol from corn and how that compares to the energy in the ethanol. Government distortions can make things happen that would not make sense in a free market.

Oil price increases

Oil price increases since 2003 have resulted in increased demand for biofuels. Transforming vegetable oil into biodiesel is not very hard or costly so there is a profitable arbitrage situation if vegetable oil is much cheaper than diesel. Diesel is also made from crude oil, so vegetable oil prices are partially linked to crude oil prices. Farmers can switch to growing vegetable oil crops if those are more profitable than food crops. So all food prices are linked to vegetable oil prices, and in turn to crude oil prices.

Demand for oil is outstripping the supply of oil and oil depletion is expected to cause crude oil prices to go up over the next 50 years. Record oil prices are what is inflating food prices worldwide, including those crops that have no relation to biofuels, such as fish and rice.

US government policy

Some argue that the US government policy of encouraging ethanol from corn is the main cause for food price increases. US Federal government ethanol subsidizes total $7 billion per year, or $1.90 per gallon. Corn is used to feed chickens, cows, and pigs. So higher corn prices lead to higher chicken, beef, pork, milk, cheese, etc.

With the high profitability of growing corn, more and more farmers switch to growing corn until the profitability of other crops goes up to match that of corn. So the ethanol/corn subsidies drive up the prices of other farm crops.

The US - an important export country for food stocks - will convert 18% of its grain output to ethanol in 2008. Across the US, 20% of the whole corn crop went to ethanol in 2007. It has a 45% biofuel target for corn by 2015.

Proposed action

Freeze on biofuel production

Environmental campaigner George Monbiot has argued for a 5-year freeze on biofuels while their impact on poor communities and the environment is assessed. One problem with this approach is that economic drivers are required in order to push through the development of more sustainable second-generation biofuel processes: these will be stalled if biofuel production decreases.

A recent UN report on biofuel also raises issues regarding food security and biofuel production. Jean Ziegler, the UN Special Rapporteur on food, concluded that while the argument for biofuels in terms of energy efficiency and climate change are legitimate, the effects for the world's hungry of transforming wheat and maize crops into biofuel are "absolutely catastrophic," and terms such use of arable land a "crime against humanity." Ziegler also calls for a 5-year moratorium on biofuel production. Food surpluses exist in many developed countries. For example, the UK wheat surplus was around 2 million tonnes in 2005. This surplus alone could produce sufficient bioethanol to replace around 2.5% of the UK's petroleum consumption, without requiring any increase in wheat cultivation or reduction in food supply or exports. However, above a few percent, there would be direct competition between first generation biofuel production and food production. This is one reason why many view second generation biofuels as increasingly important.

Non-food crops for biofuel

It has been proposed that only non-food crops be used for biofuel. This avoids direct competition for commodities like corn and edible vegetable oil. However, even if farmers switch high-quality farmland to non-edible vegetable oils like jatropha oil, there would still be less food on the market. It would also take more acres of land to produce the same amount of vegetable oil as they could with an edible oil like palm oil. As long as farmers can make more money by switching to biofuels they will. The law of supply and demand predicts that if less farmers are producing food the price of food will rise. However, jatropha is able to grow on marginal land which is unsuitable for most food crops; if done appropriately this would reduce the competition with food growing, but would divert some labor.

Cellulosic ethanol is a type of biofuel produced from lignocellulose, a material that comprises much of the mass of plants. Corn stover, switchgrass, miscanthus and woodchip are some of the more popular non-edible cellulosic materials for ethanol production. Commercial investment in such second-generation biofuels began in 2006/2007, and much of this investment went beyond pilot-scale plants. Cellulosic ethanol commercialization is moving forward rapidly. The world’s first commercial wood-to-ethanol plant began operation in Japan in 2007, with a capacity of 1.4 million liters/year. The first wood-to-ethanol plant in the United States is planned for 2008 with an initial output of 75 million liters/year.

Other second generation biofuels may be commercialized in the future and compete less with food. Biofuel from algae could use much less land and so competes less with food production. Synthetic fuel can be made from coal or biomass and may be commercialized soon.

Biofuel from food byproducts

Biofuels can also be produced from the waste byproducts of food-based agriculture (such as citrus peels or used vegetable oil) to manufacture an environmentally sustainable fuel supply, and reduce waste disposal cost. Collocation of a waste generator with a waste-to-ethanol plant can reduce the waste producer's operating cost, while creating a more-profitable ethanol production business. This innovative collocation concept is sometimes called holistic systems engineering. Collocation disposal elimination may be one of the few cost-effective, environmentally-sound, biofuel strategies, but its scalability is limited by availability of appropriate waste generation sources. For example, millions of tons of wet Florida-and-California citrus peels cannot supply billions of gallons of biofuels. Due to the higher cost of transporting ethanol, it is a local partial solution, at best.

End biofuel subsidies and tariffs

Ending subsidies and tariffs would enable sustainable development of a global biofuels market. Taxing biofuel imports while letting petroleum in duty-free does not fit with the goal of encouraging biofuels. Ending subsidies and tariffs would end the distortions that current policy is causing. The US ethanol tariff and some US ethanol subsidies are currently set to expire over the next couple years. The EU is rethinking their biofuels directive due to environmental and social concerns. On January 18 2008 the UK House of Commons Environmental Audit Committee raised similar concerns, and called for a moratorium on biofuel targets. Germany ended their subsidy of biodiesel on Jan 1 2008 and started taxing it.

Impact on poor countries

There is concern that fuel in rich countries is now competing against food in poor countries. Cars, not people, used most of the increase in world grain consumption in 2006. The grain required to fill a 25-gallon SUV gas tank with ethanol will feed one person for a year.

The World Bank estimated that in 2001 there were 2.7 billion people who lived in poverty on less than US$ (PPP) 2 per day. This was nearly half the 2001 world population of 6 billion.

While rich people buy processed and packaged foods like Wheaties, where prices don't change much if wheat prices go up, poor people buy more grains like wheat and feel the full impact of grain price changes. Poor people spend a higher portion of their income on food, so higher food prices hurt them more, unless they are farmers. If a poor person spends 60% of their money on food and then the food prices double, they will be in trouble. So higher grain and oilseed prices will affect poorer countries more.

Aid organizations that buy food and send it to poor countries are only able to send half as much food on the same budget if prices double. But the higher prices mean there are more people in need of aid.

Poor countries that do substantial farming have increased profits due to biofuels. If vegetable oil prices double, the profit margin could more than double. In the past rich countries have been dumping subsidized grains at below cost prices into poor countries and hurting the local farming industries. With biofuels using grains the rich countries no longer have grain surpluses to get rid of. Farming in poor countries is seeing healthier profit margins and expanding.

Different types of biofuels

There are different types of biofuels and different feedstocks for them. Some take more land and subsidies than others. It seems to take large subsidies and tax breaks to get US corn into ethanol while some countries are making good money growing vegetable oil without any subsides. In fact, palm oil, one of the main feedstocks for biodiesel, is so profitable in some countries, without any subsidies, that there have been serious concerns about deforestation as production has expanded quickly.

National Corn Growers Association

US government subsidies for making ethanol from corn have been attacked as the main cause of the food vs fuel problem. To defend themselves, the US corn growers association has published their views on this issue. They consider the "food vs fuel" argument to be a fallacy that is "fraught with misguided logic, hyperbole and scare tactics."

Claims made by the NCGA include:

• Corn growers have been and will continue to produce enough corn so that supply and demand meet and there is no shortage. Farmers make their planting decisions based on signals from the marketplace. If demand for corn is high and projected revenue-per-acre is strong relative to other crops, farmers will plant more corn. In 2007 US farmers planted 92.9 million acres with corn, 19% more acres than they did in 2006.

• The U.S. has doubled corn yields over the last 40 years and expects to double them again in the next 20 years. With twice as much corn from each acre, corn can be put to new uses without taking food from the hungry or causing deforestation.

• US consumers buy things like corn flakes where the cost of the corn per box is around 5 cents. Most of the cost is packaging, advertising, shipping, etc. Only about 19% of the US retail food prices can be attributed to the actual cost of food inputs like grains and oilseeds. So if the price of a bushel of corn goes up, there may be no noticeable impact on US retail food prices. The US retail food price index has gone up only a few percent per year and is expected to continue to have very small increases.

• Most of the corn produced in the US is field corn, not sweet corn, and not digestible by humans in its raw form. Most corn is used for livestock feed and not human food, even the portion that is exported.

• Only the starch portion of corn kernels is converted to ethanol. The rest (protein, fat, vitamins and minerals) is passed through to the feed coproducts or human food ingredients.

• One of the most significant and immediate benefits of higher grain prices is a dramatic reduction in federal farm support payments. According to the USDA, corn farmers received $8.8 billion in government support in 2006. Because of higher corn prices, payments are expected to drop to $2.1 billion in 2007, a 76 percent reduction.

• While the EROEI and economics of corn based ethanol are a bit weak, it paves the way for cellulosic ethanol which should have much better EROEI and economics.

• While basic nourishment is clearly important, fundamental societal needs of energy, mobility, and energy security are too. If farmers crops can help their country in these areas also, it seems right to do so.

See also

• Biodiesel
• Biofuel
• Biofuelwatch
• Deforestation
• Ethanol economy
• Ethanol fuel in Australia
• Ethanol fuel in Brazil
• Ethanol fuel in Sweden
• Ethanol fuel in the Philippines
• Ethanol fuel in the United States
• Oil depletion
• Vegetable oil economy

Bibliography

• Goettemoeller, Jeffrey; Adrian Goettemoeller (2007), Sustainable Ethanol: Biofuels, Biorefineries, Cellulosic Biomass, Flex-Fuel Vehicles, and Sustainable Farming for Energy Independence, Praire Oak Publishing, Maryville, Missouri, ISBN 978-0-9786293-0-4 . See Chapter 7. Food, Farming, and Land Use.{{citation}}: CS1 maint: multiple names: authors list (link)

• The Worldwatch Institute (2007), Biofuels for Transport: Global Potential and Implications for Energy and Agriculture, Earthscan Publications Ltd., London, U.K., ISBN 978-1-84407-422-8 . Global view, includes country study cases of Brazil, China, India and Tanzania.

External links

• FAO World Food Situation
• Plenty of Space for Biofuels in Europe