The following is an excerpt from Sustainable Ethanol: Biofuels, Biorefineries, Cellulosic Biomass, Flex-Fuel Vehicles, and Sustainable Farming for Energy Independence
Food, Farming, and Land Use
We count on agriculture for a reliable and affordable food supply. American farmers have succeeded in this mission. In fact, farmers have been plagued with surplus production and low prices in recent decades. In 2005, farmers were being paid only around $2.00 per bushel of corn even though about 14% of the crop was put through ethanol biorefineries (USDA ERS data). At these incredibly low prices, it was impossible for most corn farmers to make a profit without government subsidies. While most other commodities rise in line with inflation, grain prices have remained low.
Prices are finally rising, but corn is still a bargain compared to non-food commodities. From the beginning, a major goal of the fuel ethanol movement was higher crop prices so farmers could make a living without government subsidies. That is exactly what is happening.
Growing up in America’s Corn Belt during the 1980’s, your authors witnessed mountains of corn left in the open many years because large crops overwhelmed grain storage capacity. Grain prices fell, profits evaporated, and many farmers lost land that had been in their families for generations. A few farmers decided it was time to bring back a fuel ethanol industry that could make use of surplus grain. Their hard work eventually paid off. The fuel ethanol industry is thriving while our food supply remains plentiful and relatively inexpensive. But how much can we expect from the land? Will energy production endanger our food supply? Other concerns are even more pressing. The rising price of fossil fuels threatens the profitability of farms reliant on petroleum-derived chemical fertilizers and pesticides. These challenges present opportunities for farmers. Integrated production of food, fuel, and fiber using sustainable farming methods can provide solutions for food and energy security while also improving farm profits and our environment.
Ethanol production did not seem to drive up U.S. food prices significantly through 2006. According to the USDA Economic Research Service (ERS), the consumer price index (CPI) for food increased at an average annual rate of 2.6% from 1996 through 2005.[i] In 2006, with record growth in ethanol production and sharply higher corn prices, the CPI for food went up only 2.3%. This is 0.3% below the average annual increase over the previous 10 years. The CPI for meats alone, which should be more sensitive to the price of corn, went up only 0.7% in 2006.[ii] What if corn prices continue to rise? A study by the Center for Agriculture and Resource Development at Iowa State University estimates a 30% increase in corn prices would boost overall average food prices by only 1.1%.[iii]
Corn prices have a minimal effect on the cost of food in part because grain prices are no longer a large component of food prices. The cost of labor is more important today. “Farm value has declined continuously as a percentage of total consumer expenditures, while labor has risen continuously,” explains USDA ERS. “Labor is by far the largest and most influential component of the consumer's food dollar. Higher labor costs reflect increased food industry employment stimulated by consumer demand for convenience foods that require significant processing.”[iv] We also tend to ship foods greater distances than in the past. As the cost of fuel for shipping goes up, so will food prices. Higher crude oil prices tend to boost the cost of goods across the board.
Food AND Fuel from Corn
Running corn through a biorefinery takes only part of it out of the food supply. Ethanol is made from the starch portion of the corn kernel. Starch is less likely than other components to be in short supply for human or animal food. Most of the protein, oil, and other nutrients are left after the starch is removed. These nutrients are available for livestock or human consumption.
About 1/3 of the corn used in dry-mill ethanol production (the most common process) is available in the form of coproduct feeds. This amounts to about 17 pounds of Dried Distillers Grains with Solubles (DDGS) per bushel.[v] DDGS has a greater feed value than the same amount of whole corn in a feed ration. One study showed DDGS has a 27% greater net energy value than dry rolled corn when fed to heifers on forage.[vi]
With continued growth in ethanol production, coproduct supplies could eventually exceed the amount needed for animal feed. Coproducts could then be used as fuel for powering ethanol biorefineries. Brazilian biorefineries use leftover portions of sugar cane for power production. Using DDGS this way would reduce the amount of natural gas or coal needed for powering ethanol biorefineries. Human consumption is another promising use for corn ethanol coproducts. Companies are developing processing techniques that yield corn oil, corn fiber, gluten, and proteins for human consumption, while also producing ethanol and even raw materials for biodegradable plastics. In addition to enhancing our food supply, these new processing methods could increase the profitability of ethanol biorefineries.
See chapter 7 of Sustainable Ethanol for these additional topics:
Ethanol and World Hunger
Fossil Fuels and Agriculture
Land Use Issues
Diversifying Energy Crops
Enhancing Food Production with Energy Farming
Figure 7-1. Average Price Paid U.S. Farmers per Bushel of Corn, 1980-2007
Figure 7-2. Corn Planted Since 1992 per Market Year
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[i]. USDA Economic Research Service, Food CPI, Prices, and Expenditures, March 26, 2007, http://www.ers.usda.gov/.
[ii]. USDA Economic Research Service, Food CPI, Prices, and Expenditures: CPI for Food Forecasts, March 26, 2007, http://www.ers.usda.gov/.
[iii]. Helen H. Jensen and Bruce A. Babcock, “Do Biofuels Mean Inexpensive Food Is a Thing of the Past?,” Iowa Ag Review Online 13 (Summer 2007).
[iv]. USDA Economic Research Service, Food Marketing and Price Spreads: Relationships between Price Spreads and Marketing Input Costs, April 25, 2002, http://www.ers.usda.gov/.
[v]. Keith Collins (Chief Economist, USDA), Statement before the U.S. Senate Committee on Environment and Public Works, September 6, 2006, http://www.usda.gov/oce/newsroom/congressional_testimony/
[vi]. G. E. Erickson, T. J. Klopfenstein, D. C. Adams, and R. J. Rasby, “General Overview of Feeding Corn Milling Co-Products to Beef Cattle,” in Corn Processing Co-products Manual (University of Nebraska Lincoln), January 2005, http://beef.unl.edu/byprodfeeds/manual_02_02.shtml.