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[calcars-news] Lester Brown: Diversion of Grain
to Fuel Cars Raises World Food Prices
This week the auto-makers met with President
Bush, once again pointing to their support for
flex-fuel vehicles as their main answer to high
oil prices and dependency on imported oil. (In an
acknowledgment of the President's interest in
PHEVs, Ford towed in a fuel cell PHEV concept
car, and DaimlerChrysler announced it was
committing to build 20 plug-in hybrid Sprinter van prototypes.)
Lester Brown, author of Plan B 2.0, has been a
long-time advocate of PHEVs, and was one of the
first to predict that auto-makers easy embrace of
corn ethanol would create a price war between
food and fuel. Here he traces the results as they ripple through the economy.
Massive Diversion of U.S. Graint to Fuel Cars is
Raising World Food Prices March 21, 2007 - 3
http://www.earth-policy.org/Updates/2007/Update65.htm
Lester R. Brown, Earth Policy Institute
If you think you are spending more each week at
the supermarket, you may be right. The escalating
share of the U.S. grain harvest going to ethanol
distilleries is driving up food prices worldwide.
Corn prices have doubled over the last year,
wheat futures are trading at their highest level
in 10 years, and rice prices are rising too. In
addition, soybean futures have risen by half. A
Bloomberg analysis notes that the soaring use of
corn as the feedstock for fuel ethanol is
creating unintended consequences throughout the global food chain.
The countries initially hit by rising food prices
are those where corn is the staple food. In
Mexico, one of more than 20 countries with a
corn-based diet, the price of tortillas is up by
60 percent. Angry Mexicans in crowds of up to
75,000 have taken to the streets in protest,
forcing the government to institute price controls on tortillas.
Food prices are also rising in China, India, and
the United States, countries that contain 40
percent of the worlds people. While relatively
little corn is eaten directly in these countries,
vast quantities are consumed indirectly in meat,
milk, and eggs in both China and the United States.
Rising grain and soybean prices are driving up
meat and egg prices in China. January pork prices
were up 20 percent above a year earlier, eggs
were up 16 percent, while beef, which is less
dependent on grain, was up 6 percent.
In India, the overall food price index in January
2007 was 10 percent higher than a year earlier.
The price of wheat, the staple food in northern
India, has jumped 11 percent, moving above the world market price.
In the United States, the U.S. Department of
Agriculture projects that the wholesale price of
chicken in 2007 will be 10 percent higher on
average than in 2006, the price of a dozen eggs
will be up a whopping 21 percent, and milk will
be 14 percent higher. And this is only the beginning.
In the past, food price rises have usually been
weather related and always temporary. This
situation is different. As more and more fuel
ethanol distilleries are built, world grain
prices are starting to move up toward their
oil-equivalent value in what appears to be the beginning of a long-term rise.
The food and energy economies, historically
separate, are now merging. In this new economy,
if the fuel value of grain exceeds its food
value, the market will move it into the energy
economy. As the price of oil climbs so will the price of food.
Some 16 percent of the 2006 U.S. grain harvest
was used to produce ethanol. With 80 or so
ethanol distilleries now under construction,
enough to more than double existing ethanol
production capacity, nearly a third of the 2008
grain harvest will be going to ethanol.
Since the United States is the leading exporter
of grain, shipping more than Canada, Australia,
and Argentina combined, what happens to the U.S.
grain crop affects the entire world. With the
massive diversion of grain to produce fuel for
cars, exports will drop. The worlds breadbasket
is fast becoming the U.S. fuel tank.
The number of hungry people in the world has been
declining for several decades, but in the late
1990s the trend reversed and the number began to
rise. The United Nations currently lists 34
countries as needing emergency food assistance.
Many of these are considered failed and failing
states, including Chad, Iraq, Liberia, Haiti, and
Zimbabwe. Since food aid programs typically have
fixed budgets, if the price of grain doubles, food aid will be reduced by half.
Urban food protests in response to rising food
prices in low and middle income countries, such
as Mexico, could lead to political instability
that would add to the growing list of failed and
failing states. At some point, spreading
political instability could disrupt global economic progress.
Against this backdrop, Washington is consumed
with ethanol euphoria. President Bush in his
State of the Union address set a production goal
for 2017 of 35 billion gallons of alternative
fuels, including grain-based and cellulosic
ethanol, and liquefied coal. Given the current
difficulties in producing cellulosic ethanol at a
competitive cost and given the mounting public
opposition to liquefied coal, which is far more
carbon-intensive than gasoline, most of the fuel
to meet this goal might well have to come from
grain. This could take most of the U.S. grain
harvest, leaving little grain to meet U.S. needs,
much less those of the hundred or so countries that import grain.
The stage is now set for direct competition for
grain between the 800 million people who own
automobiles, and the worlds 2 billion poorest
people. The risk is that millions of those on the
lower rungs of the global economic ladder will
start falling off as higher food prices drop
their consumption below the survival level.
In February 2007 the World Food Programme
Director James T. Morris reported that 18,000
children are now dying every day from hunger and
malnutrition. This daily loss of life is six
times the number of U.S. combat fatalities in
Iraq over the last four years.There are
alternatives to this grim scenario. A rise in
auto fuel efficiency standards of 20 percent,
phased in over the next decade would save as much
oil as converting the entire U.S. grain harvest into ethanol.
One option that is gaining momentum is a shift to
plug-in hybrids. Adding a second storage battery
to a gas-electric hybrid car along with a plug-in
capacity so that the batteries can be recharged
at night allows most short-distance drivingdaily
commuting and grocery shopping, for exampleto be
done with electricity. If this shift were
accompanied by investment in thousands of wind
farms that could feed cheap electricity into the
grid, then cars could run largely on electricity
for the equivalent cost of $1 per gallon gasoline.
Encouragingly, three auto manufacturersToyota,
Nissan, and GMhave announced plans to bring
plug-in hybrid cars to market. Plug-In Partners,
which is spearheading a national campaign to
shift to plug-in hybrid cars, already has 508
partners, including electrical utilities,
corporations, state and city governments, and
farm and environmental groups. Among its
fast-growing list of partners are the American
Public Power Association, Electric Power Research
Institute, American Wind Energy Association,
American Corn Growers Association, and the cities
of Los Angeles, Dallas, Chicago, and Boston.
Already a number of Partners have collectively
pledged to purchase for their own fleets more
than 8,000 plug-in hybrids as soon as they reach the market.
Ethanol euphoria is not an acceptable substitute
for a carefully thought through policy. For
Washington, it is time to decide whether to
continue with the current policy of subsidizing
more and more grain-based fuel distilleries or to
encourage a shift to more fuel-efficient cars and
a new automotive fuel economy centered on plug-in
hybrid cars and wind energy. The choice is
between a future of rising world food prices,
spreading hunger, and growing political
instability, or one of stable food prices,
sharply reduced dependence on oil, and much lower carbon emissions.
At
http://www.earth-policy.org/Updates/2007/Update65.htm
you can find links to many sources of additional information.
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Felix Kramer [EMAIL PROTECTED]
Founder California Cars Initiative
http://www.calcars.org
http://www.calcars.org/news-archive.html
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