Friday, April 25, 2008

Global Food Crisis



While it seems early in this "crisis cycle" of which there seems to be an endless parade in the MSM, I thought I'd comment on the current global food crisis. Apparently the food cricis is now "eclipsing" the climate change crisis. Funny, American farmers finally start getting a reasonable return for a bushel of starch grain that can be converted to ethanol and the entire world goes into convulsions blaming them for their greed as the cause of a looming food shortage. Never mind that the cost of gasoline, diesel, fertilizer and other petro products that are necessary to the production of grain shoot through the roof as a barrel of oil goes triples in cost in the space of three years. On a comparison basis, I understand that 4oo lbs of corn (aproximately the caloric need of an adult human for a single year) will produce 25 gallons of ethanol. At 56 lbs/bushel for corn, that is about 1/3 bushel per gallon of ethanol. Ethanol is probably more valuable than gasoline ($3.40 a gallon - today's price), but lets assume that it is the same value. That means that a bushel of corn at today's market price of $6.00/bushel is producing at least $10.20 worth of ethanol. There is some cost of production at the still that is unaccounted for here, but it seems like a reasonable value in today's market place.

As the above chart produced by the FDA shows, corn divered to ethanol production in the US is currently probably less than 20% of total production. However, corn production can and has increased by this amount. The efficiency of ethanol production per bushel of corn is already increasing since 2005. Moreover, as the market for ethanol grows, other feedstock sources that are currently waste products, such as corn stover, can move to fill the source material requirements of the industry. This article by Clifford May confirms with facts and statistics that diversion of feed grains to ethanol production is not the cause of food price increases. Here is a quote from another article found here:
"The doubling of rice prices cannot therefore be explained by a sudden shift in supply and demand. And the same is true of oil, since the global growth of oil output in the past two years has been substantially faster than the growth of consumption. The key factor, as in the last great commodity inflation of the 1970s, appears not to be any immediate supply shortage but panic buying by consumers, governments and financial investors, in anticipation of possible future shortages of supply."
Maybe the solution is to develop greater domestic energy resources like arctic and offshore oil and gas fields, wind, coal, nuclear, solar. Then the demand and unit price for hydrocarbon energy from the Middle East will decline causing a corresponding reduction in market demand for ethanol. That would in turn divert more starch grains to food production.






1 comment:

Alien Probe said...

I've gotten, from more than one source, that it takes more than one gallon of gas to produce a gallon of ethanol, and that a gallon of ethanol has less energy than a gallon of gas. So, we either raise American production of gas or buy more from the Middle East, to produce a fuel that gives us less energy per gallon than gas? Oh, that makes perfect sense.
And, just to sweeten the pot, the cost of corn, wheat, soy, milk and meat go up, because the price of corn has gone way up leading to more production of corn to produce ethanol and less production of other food grains to produce food. That makes perfect sense too.
Bottom line, using corn to produce ethanol is a two time loser. A gallon of ethanol give us less energy than a gallon of gas, and at the same time causes food prices to go up.
There is currently no substitute for oil. It is the life blood of modern civilization. Ethanol is not only not the answer, it's not even a part of the answer.
Ethanol must die!