This is an extremely unpopular topic here in Iowa, but I think the ethanol business may very well get whacked at the federal level in the name of global food security. Wheat prices have tripled and other cereal prices have doubled since 2000. If the impoverished masses in the Middle East are priced out of the food market we could plant corn from coast to coast on every patch of soil available and not begin to replace the liquid fuel loss that would ensue should that region fall into chaos.
The Oil Drum has recently carried two articles with detailed analysis of this situation. While both are weighty reads I feel they're a gateway to understand the global food stress our biofuels push is causing.
The first article is by Stuart Staniford and it is entitled Fermenting the Food Supply.
Many people are aware that food-based biofuel production has had an influence on food prices. Many people also know that US ethanol production is growing rapidly and now using a noticeable fraction of the total corn supply. However, I'm going to argue that the situation in the near term is potentially more serious than is generally realized.
I will use a mixture of existing data, analysis of biofuel profitability, and simple modeling of biofuel production as an infection or diffusion process affecting the food supply, to demonstrate that there are reasonably plausible scenarios for biofuel production growth to cause mass starvation of the global poor, and that this could happen fairly quickly - quite possibly within five years, and certainly well within the life of the existing policy regimes. It doesn't have to be this way, but unless we start doing things differently soon, the risks are significant.
The second article is by Yair Wallach and it is entitled Bread and Oil: Rising Food Prices and the Middle East
Abstract
The use of food crops for biofuels is one of the key factors driving a dramatic increase in the global price of cereals. As Stuart Staniford demonstrated here in the past few weeks, this trend is set to intensify. This article will look at the potential implications of rising wheat prices for countries in the Middle East, taking Egypt and Morocco as examples. Government food subsidies in both countries have so far protected the poor urban population from much of the global hike in cereal prices. However, as food prices continue to spiral, subsidies will demand a growing share of national budgets. Subsidies cuts seem inevitable, leading to riots and political instability.The further development of biofuels could make food too costly for millions of poor in the Middle East, and destabilise the region which supplies most of the world?s oil exports.
The same high prices for food (and hence sometimes reasonably profitable farming that can be sustained ECONOMICALLY) as are said to be happening due to the conversion of the 'carbs in corn into EtOH can also be achived/caused by:
1. Growing less food via lower fertilizer usage (lower productivity per acre).
2. Growing less food by having less acreage under cultivation, at high productivity.
Of course, 1 and 2 can be done simultaneously....
3. Feeding more grains and beans (higher percentages of the harvested crops) to animals such as cows. On average, less than 20% of the protein fed to these animals stays with the animals, and then this means that the humans chowing on those cows are eating the equivalent of more than 5 times as much food as non-carnivores, or those with more moderate consumption rates of cow. Actually, the result is even worse, but you get the idea. The result increases demand for food that would supply less people with food, leaving less for the rest, who then have to pay more for the "less" that is left.
4. Convert more foods to energy, especially "car and truck food". This increases demand for the oils and carbohydrates, but does nothing to the proteins, which get concentrated and then get sold for someone's food somewhere. Maybe the protein will drop in price, while the energy part (oils and sugars/starches) rises to meet the insatiable requirements of SUck-V's. Maybe not....
5. Raise the price of ammonia fertilizer that is presently made with fossil fuels - something going on today. If it takes 200# of NH3/acre, and NH3 goes for $1000/ton (not there yet, but soon, gievn Ngas prices worldwide this year - its only $800/ton in "retail" levels), then that is $100/acre just for the fertilizer. At 200 bushels/acre, that means NH3 costs $0.50/bushel just for the fertilizer, and NH3 is just one of the components that go into the production cost of corn...That's 1/4 to 1/8 of the corn selling price used up just for NH3....
6. Let's "grow" more people. More people = more deamnd for food, and if food production is kept constant or delcines....well, up go prices, irrespective of EtOH plants or no EtOH plants....
7. How about the traditional way....grow a bunch of food, more than can be consumed in the U.S. for a few years in a row. Crop prices then collapse, throwing another 10% of farmers out of business, and 10% of small town rural America goes the way of the ghost town....Meanwhile, the surplus gets dumped into countries like Mexico, throwing a million farmers off of their farms, since they can't compete with the dumped stuff Made in USA, with the Federal Govt eating that cost, too. Well, guess where those unemployed and landless farmers tend to migrate towards....the place that helped throw them off the farms they used to call home....
8. Crank up the price of oil, especially diesel. Those tractors don't run on good looks alone....and those fields are not going to get seeded, plowed, fertilized and harvested by horse powered devices to any significant extent.
So, there are so many ways to crank up crop prices. I'm sure that there are more variations on these themes. One way to keep prices at least somewhat predictable is to sign long term purchase agreements with farmers, or farmer's coops, and that is one of the things going on between EtOH facilities and farmers. This at least provides a bit of economic security to farmers, who would otherwise continue to get whipsawed by supply gluts.
Another way to keep crop prices somewhat stable and yet not bankrupt farmers is to minimize petroleum inputs to the farm. Peak Oil and Peak Ngas are doing that anyway, or at least providing a monetary incentive to do this. Fuel, electricity and fertilizer are three obvious places to start, as there are renewable ways to do this. The advantages range from more jobs to a more stable climate....lots of wins on that one.
And finally, there is EtOH and other biofuels. Converting coal and/or Ngas into EtOH via corn is a system that leaves MUCH room for improvement. The solutions involve more smart capital investments so that the production of the EtOH and by product DDGS/DDG use minimal amounts of fossil fuels, or maybe none at all of significance. It is not rocket science...just applied and motivated science and clever engineering, with a focus on minimizing fossil fuel usage while gaining lots of long term financial security.
As for that by product CO2, collected from the atmosphere by all those crops....well, it could be buried (that is a net CO2 reduction in the atmosphere, not just a mitigation). Or, people can "double up" and if a source of renewable energy is available, this CO2 can be reduced to useful items. Either algae, greenhouses, or the CO2 can be easily reduced to MeOH (a biodiesel raw material), EtOH, diesel, gasoline and loads of other useful items like Acetic Acid, Formic Acid or ultimately methane.
Got wind and a bit of water? You've got Hydrogen! Got CO2 and H2? You've got lots of options. Got air and H2? You've got NH3, and a host of options on that one, too.
Of course, some other helpful items would be access to capital, or capital, a bit of willingness to consider some options, and a desire to get at least partially freed from the yoke of oil and natural gas, at least the kinds that used to come out of the ground in this country quite a bit, but now in increasingly smaller quantities.
And none of these options survives a cheap energy future. Just a reasonably priced energy society.
Nb41