[sustran] GREAT dramatic warning about biofuels, but...

[Todd Edelman]

Hi all,

This was really great for me until the very last paragraph.

- T

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Eco-Economy Update 2006-5
July 13, 2006

SUPERMARKETS AND SERVICE STATIONS NOW COMPETING FOR GRAIN

Lester R. Brown

Cars, not people, will claim most of the increase in world grain
consumption this year. The U.S. Department of Agriculture projects that
world grain use will grow by 20 million tons in 2006. Of this, 14 million
tons will be used to produce fuel for cars in the United States, leaving
only 6 million tons to satisfy the world�s growing food needs.

In agricultural terms, the world appetite for automotive fuel is
insatiable. The grain required to fill a 25-gallon SUV gas tank with
ethanol will feed one person for a year. The grain to fill the tank every
two weeks over a year will feed 26 people.

Investors are jumping on the highly profitable biofuel-bandwagon so fast
that hardly a day goes by without another ethanol distillery or biodiesel
refinery being announced somewhere in the world. The amount of corn used
in U.S. ethanol distilleries has tripled in five years, jumping from 18
million tons in 2001 to an estimated 55 million tons from the 2006 crop.

In some U.S. Corn Belt states, ethanol distilleries are taking over the
corn supply. In Iowa, a staggering 55 ethanol plants are operating or have
been proposed. Iowa State University economist Bob Wisner observes that if
all these plants are built, they would use virtually all the corn grown in
Iowa. In South Dakota, a top-ten corn-growing state, ethanol distilleries
are already claiming over half of the corn harvest.

With so many distilleries being built, livestock and poultry producers
fear there may not be enough corn to produce meat, milk, and eggs. And
since the United States supplies 70 percent of world corn exports,
corn-importing countries are worried about their supply.

Since almost everything we eat can be converted into fuel for automobiles,
including wheat, corn, rice, soybeans, and sugarcane, the line between the
food and energy economies is disappearing. Historically, food processors
and livestock producers that converted these farm commodities into
products for supermarket shelves were the only buyers. Now there is
another group, those buying for the ethanol distilleries and biodiesel
refineries that supply service stations.

As the price of oil climbs, it becomes increasingly profitable to convert
farm commodities into automotive fuel, either ethanol or biodiesel. In
effect, the price of oil becomes the support price for food commodities.
Whenever the food value of a commodity drops below its fuel value, the
market will convert it into fuel.

Crop-based fuel production is now concentrated in Brazil, the United
States, and Western Europe. The United States and Brazil each produced
over 4 billion gallons (16 billion liters) of ethanol in 2005. While
Brazil uses sugarcane as the feedstock, U.S. distillers use
grain�mostly
corn. The 55 million tons of U.S. corn going into ethanol this year
represent nearly one sixth of the country�s grain harvest but will
supply
only 3 percent of its automotive fuel. (For additional data, see
www.earthpolicy.org/Updates/2006/Update55_data.htm.)

Brazil, the world�s largest sugar producer and exporter, is now
converting
half of its sugar harvest into fuel ethanol. With just 10 percent of the
world�s sugar harvest going into ethanol, the price of sugar has
doubled.
Cheap sugar may now be history.

In Europe the emphasis is on producing biodiesel. Last year the European
Union (EU) produced 1.6 billion gallons of biofuels. Of this, 858 million
gallons were biodiesel, produced from vegetable oil, mostly in Germany and
France, and 718 million gallons were ethanol, most of it distilled from
grain in France, Spain, and Germany. Margarine manufacturers, struggling
to compete with subsidized biodiesel refineries, have asked the European
Parliament for help.

In Asia, China and India are both building ethanol distilleries. In 2005,
China converted some 2 million tons of grain�mostly corn, but also
some
wheat and rice�into ethanol. In India ethanol is produced largely from
sugarcane. Thailand is concentrating on ethanol from cassava, while
Malaysia and Indonesia are investing heavily in additional palm oil
plantations and in new biodiesel refineries. Within the last year or so,
Malaysia has approved 32 biodiesel refineries, but recently has suspended
further licensing while it assesses the adequacy of palm oil supplies.

The profitability of crop-based fuel production has created an investment
juggernaut. With a U.S. ethanol subsidy of 51¢ per gallon in effect
until
2010, and with oil priced at $70 per barrel, distilling fuel alcohol from
corn promises huge profits for years to come.

In May 2005, the 100th U.S. ethanol distillery came on line. Seven of
these distilleries are being expanded. Another 34 or so are under
construction and scores more are in the planning stages. The soaring
demand for crop-based fuel is coming when world grain stocks are at the
lowest level in 34 years and when there are 76 million more people to feed
each year.

The U.S. investment in biofuel production in response to runaway oil
prices is spiraling out of control, threatening to draw grain away from
the production of beef, pork, poultry, milk, and eggs. And, most
seriously, the vast number of distilleries in operation, under
construction, and in the planning stages threatens to reduce grain
available for direct human consumption. Simply put, the stage is being set
for a head-on collision between the world�s 800 million affluent
automobile owners and food consumers. Given the insatiable appetite of
cars for fuel, higher grain prices appear inevitable. The only question is
when food prices will rise and by how much. Indeed, in recent months,
wheat and corn prices have risen by one fifth.

For the 2 billion poorest people in the world, many of whom spend half or
more of their income on food, rising grain prices can quickly become life
threatening. The broader risk is that rising food prices could spread
hunger and generate political instability in low-income countries that
import grain, such as Indonesia, Egypt, Nigeria, and Mexico. This
instability could in turn disrupt global economic progress. If ethanol
distillery demand for grain continues its explosive growth, driving grain
prices to dangerous highs, the U.S. government may have to intervene in
the unfolding global conflict over food between affluent motorists and
low-income consumers.

There are alternatives to using food-based fuels. For example, the
equivalent of the 3 percent gain in automotive fuel supplies from ethanol
could be achieved several times over�and at a fraction of the
cost�simply
by raising auto fuel efficiency standards by 20 percent. Investing in
public transport could reduce overall dependence on cars.

There are other fuel options as well. While there are no alternatives to
food for people, there is an alternative source of fuel for cars, one that
involves shifting to highly efficient gas-electric hybrid plug-ins. This
would enable motorists to do short-distance driving, such as the daily
commute, with electricity. If wind-rich countries such as the United
States, China, and those in Europe invest heavily in wind farms to feed
cheap electricity into the grid, cars could run primarily on wind energy,
and at the gasoline equivalent of less than $1 a gallon.

#    #   #


Additional data and information sources at www.earthpolicy.org or contact
jlarsen (at) earthpolicy.org

For more in-depth information see Chapters 2 and 10 in Plan B 2.0, at
http://www.earthpolicy.org/Books/PB2/Contents.htm

For reprint permission contact rjk (at) earthpolicy.org


------------------------------------------------------

Todd Edelman
Director
Green Idea Factory

++420 605 915 970

edelman at greenidea.info
http://www.worldcarfree.net/onthetrain

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