Lester Brown of the Earth Policy Institute is again painting a bleak picture of future food shortages, this time pointing the finger at grain based ethanol, particularly corn.
Best known as founder and long-time president of the Worldwatch Institute, Brown trots out warnings of future famine every few years and gets lots of media coverage.
The problem with his reports is not that the underlying analysis is far wrong, but that the forecast is usually torqued up to an apocalyptic level.
Until recently, he warned that water shortages and environmental degradation in China would force that country to import huge amounts of grain, forcing up the price and causing hunger among the poor in developing countries.
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China has struggled with drought and insufficient grain production but has not yet had to import huge amounts of grain.
Now he has turned his criticism to the booming ethanol industry in the United States.
He argues that the U.S. ethanol industry is growing much faster than what the U.S. Department of Agriculture has forecast and that it will consume half of America’s annual corn production by 2008, not 25 percent as forecast by the USDA.
The result, he says, would be high corn prices, high prices for crops that substitute for corn such as wheat and rice and reduced U.S. corn exports, setting up a struggle between those who drive and the world’s poor.
“The competition for grain between the world’s 800 million motorists who want to maintain their mobility and its two billion poorest people who are simply trying to survive is emerging as an epic issue,” he wrote. “Soaring food prices could lead to urban food riots in scores of lower-income countries that rely on grain imports, such as Indonesia, Egypt, Algeria, Nigeria and Mexico.”
Brown calls for a moratorium on new ethanol plants to provide time to figure out how much corn can be used in ethanol without causing soaring food prices.
He also suggests that America’s goals in increasing energy self sufficiency and reducing greenhouse gases could be better met by mandating improved fuel efficiency standards and by increasing research into cellulose-based ethanol production.
Again, Brown is onto something but is too sensationalist in his conclusions.
Corn-based ethanol production in the U.S. in 2008 will likely be higher than forecast. On Jan. 8, Cargill announced a wholly owned subsidiary would build four 380 million-litre-per-year ethanol plants in the U.S. Midwest. Barely a day goes by without the announcement of a planned ethanol plant somewhere in the U.S.
And biofuel development is not confined to the U.S. Production is growing throughout the world.
Corn traders are aware of these developments and have pushed prices to the highest level in years. However, values have not climbed into the stratosphere. They seem high only because prices in the recent past were so low.
There was a sustained period of equally high corn prices in the mid-to-late 1990s after a series of small U.S. corn crops. The world did not end then and it won’t now.
Stronger grain prices should not cause huge food cost inflation. As farmers are well aware, in the developed world raw grain makes up only a small portion of the value of most food, the rest being costs such as energy, labour, packaging and transportation.
Adding a dollar per bushel to grain prices is unlikely to squeeze consumers’ food budgets. And a slight increase in food costs should be offset by reduced tax spending on agricultural support programs.
Stronger grain prices will also be a boon to many of the developing world’s poor farmers. Already farmers in India and China are enjoying higher prices for their commodities, just like their counterparts here in North America.
Brown is correct that in the short term, booming ethanol growth could cause a squeeze. Indeed, China’s leaders have put the brakes on ethanol development there because, after years of neglect, China’s corn production isn’t keeping up with domestic demand. Many believe China will move from being a net corn exporter to an importer in the next couple of years and an overbuilt ethanol industry there would make matters worse.
But stronger corn prices will lead to increased production around the world.
The first responses will be an acreage shift from lower priced crops to corn and more use of inputs such as fertilizer and high yield seeds.
But within a few years we will also see a new generation of improved seeds. American corn yields doubled in the last 30 years and yield gains might come more quickly in coming years with the benefits of biotechnology.
Robb Fraley, chief of technology at Monsanto, notes that the corn genome has been mapped and that several traits have been marked.
The use of molecular breeding should lead to faster breeding improvements.
Monsanto expects to be able to start rolling out seeds with improved drought tolerance in 2010. When this is married to herbicide, disease and insect tolerances, yield potentials should improve dramatically, he said.
Also, ethanol production processes are improving. Monsanto and Cargill are introducing a process that will be used in conjunction with a high-oil corn seed.
It will remove the oil before it is distilled, allowing the plant to generate corn oil for food or biodiesel and an improved feed for swine and poultry.
Fraley forecasts that if the American corn industry can double yields to 300 bu. per acre, plant 90 million acres of corn per year, up from 79.4 million in 2006, and harvest corn stover for cellulose ethanol plants, about one-third of American gasoline requirements could be met by 2030.
That is a much different and more likely story than the one painted by Brown.
