Biofuels Digest Editorial: Food vs fuel, sustainability and the jihad against biofuels




From the Editor
We have become concerned by the tone of “food vs fuel” news reporting. It appears to have sent jitters not only through the marketplace but also through the alternative energy movement.

Innumerable reports are appearing with a “when in doubt, blame biofuels” slant, and driving the point home that biofuels are bad for the economy, bad for food prices, bad for third world countries, and bad for the environment.

We were initially amused when a number of near-hysterical reports appeared, blaming biofuels for a 50% increase in the price of European wheat, a 39% increase in the price of South African cheddar cheese, and a 0.9% increase in Houston food prices in the month of July.

We became somewhat disgusted when the director of the International Food Policy Research Institute predicted an 80% rise in food prices as more land is used for biofuels.

We were alarmed when corn ethanol was blamed for 50% hikes in the price of corn tortillas in Mexico and the resultant food riots.

We were shocked when the Crown Prince of Holland claimed that the amount of biofuel in an SUV tank uses as much water as it takes to produce enough grain to support one person for a year.

We were flabbergasted when Ronald R. Cooke (”The Cultural Economist”) wrote that the true cost of corn ethanol is $6.89 per gallon.

But we decided to take action when we were referred to an article published on ZNet, titled “Maize of deception: How corn-based ethanol can lead to starvation and environmental disaster“, and stating that “when Fidel Castro writes that using corn, or any other food source, could result in the premature death of upwards of three billion people….it would be foolhardy for the US to ignore his foreboding message on the subject.”

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Disclaimer: Biofuels Digest does not usually find itself making the case for corn ethanol, which by most measures is one of the least efficient of biofuels.

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But …. the tone of the debate has become a jihad against biofuels, fought by idealogues and zealots who use fear, surprise, ruthless efficiency, and almost fanatical devotion to myth as their chief weapons (to paraphrase Monty Python).

By contrast, Biofuels Digest will use facts in lieu of myth. As Thomas Jefferson once wrote, “let facts be submitted to a candid world”.

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Myth #1: Biofuel demand in the United States for corn is taking corn away from starving Mexican children by causing a rapid rise in tortilla prices of between 50% and 100%.

Fact: It has been widely reported that ethanol is made from yellow (“field” or “cattle”), corn, while Mexican tortillas are made primarily from white corn. US corn exports supply only 14% of white corn consumed in Mexico. The rest is produced domestically by Mexico, which does not sell corn to ethanol producers.

Since 1993, the Mexican population has risen by 19%, and domestic Mexican corn production has grown 18%. However, Mexican corn consumption has risen 57% in the same period. Hence the rise in tortilla prices.

Oil prices have risen 129% since 2005, which factor into transportation cost, energy costs for manufacturing, harvest costs (combines), wage costs for employees (using transportation), packaging costs (plastics), and cultivation costs (fertilizers).

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Myth #2: The US biofuels industry is using so much corn that it is driving up the price of corn used for feed grains.

Fact: Total corn usage by the biofuels industry (around 2.3 billion bushels) is less than the increase in US corn production between 2005-2007. Plus, 33% of the output of ethanol production is distillers grains which are used as cattle feedstock.

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Myth #3: Biofuels have caused corn producer prices to soar over $4.00, and farmers are planting less soybean and other grains to take advantage of corn prices, driving shortages of wheat and barley that have caused the price of those grains to rise.

Fact: Corn producer prices have dropped more than 15 percent since the spring, to $3.24 per bushel (56 pounds), or $0.06 per pound or about $0.03 per ear. Farmers have reported in surveys that they expect to decrease corn acreage in 2008, not increase.

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Myth #4: The cost of Corn Flakes is soaring, up 15% this year ounce for ounce, because of the rising cost of corn.

Fact: The price of a box of Corn Flakes is $3.85 at the supermarket this year, of which $0.025 is the price of the corn. Kelloggs raised the price of Corn Flakes by $0.20 per box this year, even though corn prices represent less than 1% of the cost of the product.

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Myth #5: The “real cost of ethanol” is $6.89 per gallon.

Fact: Using the math of the Cultural Economist, we calculated the real cost of E10 — which is what 99.9% of American will experience, at $2.80 and the real cost of gasoline at $2.75. The difference is the 5 cent subsidy paid to the refiner. That can arguably be justified as good value for keeping our dollars at home creating jobs, rather than running up a trade deficit buying oil from (in many cases) nefarious regimes. But it is a nickel, and it’s your choice of whether that is a nickel well spent.

Cost breakdown

$0.24 10% of Corn Ethanol Futures Market quote for September 2007 Delivery (to make E10)
$0.03 Add cost of transporting, storing and blending corn ethanol
$2.48 Cost of gasoline
$0.05 Add cost of subsidies paid to blender
$2.80 Total Direct Costs per Gallon

The Cultural Economist added several items with which Biofuels Digest would (respectfully) beg to differ.

We think it is spurious to add $1.79 to the cost of ethanol because of rising food prices. Food prices are rising because of: transportation, fertilizer, packaging, harvesting, processing and marketing costs, which account, by example, for 93% of the cost of a box of Corn Flakes and in almost all cases are rising because of a 129% hike in oil prices since 2005.

We believe it is spurious to assign a cost of $0.06 per gallon for the cost of damage to the car because E10 does not damage a car. Further, adding $0.40 for waste caused by evaporation we believe is spurious, for it applies to any fuel, and is readily limited by the use of modern fuel pumps with guards to reduce evaporation during fueling.

We also believe that it is spurious to ding ethanol $0.09 for the cost of making gasoline that can be mixed with ethanol. Gasoline is required by law to be compatible with an oxidizer, of which ethanol is one …. but not the only …. option. The cost of making gasoline blendable with an oxidizer is part of the basic cost of modern gasoline fuel.

We think it is spurious to account for the loss in engine efficiency of $1.27 per gallon without accounting for the fact that ethanol, as an oxidizer, allows engines to run more efficiently. The net change in MPG: zero.

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Myth #6: It takes as much water to fill an SUV tank with biofuels as it takes to feed a man with grains for a year.

Fact: It always depends on how much grain a person eats in a day, but using: the USDA US adult average consumption of grains; an allowance of 449 gallons of water per pound of corn based on irrigation tables; and a usage of 2.19 gallons of water per gallon of ethanol based on a North Dakota plant breaking ground today: we conclude that it takes 37 incremental gallons of water to make enough E85 ethanol to fill an SUV. That’s enough water to sustain the average US adult grain diet for 216 minutes. Just a tad short of the …. wait for it …. 525,600 minutes …. claimed by the Crown Prince.
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In Our Humble Opinion …

The biggest disruptor in food prices is transportation cost — which is related to oil prices not biofuel feedstock issues.

The second biggest disruptor is bad weather — the scourge cousin of global warming. Worldwide wheat production is down down because of weather/climate problems, especially crop failures in Eastern Europe.

The third biggest disruptor is population — the rate of population increase in food importing nations vastly exceeds the rate of population increase in food exporting nations, which makes the globe more transportation-dependent for food supply every year. Marketing costs continue to be problematic, especially in the G8.

Higher food prices, and reduced transportation costs, are good for the world. Higher food prices mean that food exporters in the third world have more money, whereas food importers are shielded from price increases because reduced transport costs offset feedstock price increases.

Good strong foodstock/feedstock prices keep farmers from having to cross borders and sectors to make a living in manufacturing or services, and reduce border-related unrest in many hotspots around the world.

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We believe the biggest challenge faced by the world, as it attempts to craft a sensible global energy policy, is the buzz of disinformation.

Contrast the attention that the Crown Prince of Holland will generate by claiming that an SUV’s worth of ethanol is produced with the water needed to produce enough grains for one adult for one year….compared with the paltry audience we will see for this article, which demonstrates with science and facts that the more correct figure is 216 minutes not 365 days.

It’s an exaggeration of 99.96%, and from the sublime country of Holland we would have hoped for a more appropriate use of the Crown Prince’s time.

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