Corn Ethanol: The Fuel to Higher Food Prices
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I have been saying that food prices will go up this year and we have only seen the beginning. I am not being a pessimistic person, but American citizens have to wake up to what ethanol production is doing to our food prices.We are not looking at the old saying: Pay me now or pay me later but we are paying dearly now and we will pay even more dearly later. Biofuels will continue to cause higher food prices.
What is the value of diverting food crops for fuel? That was the question asked when the livestock and grocery lobby vehemently opposed a U.S. energy bill last fall and said that their costs will continue to escalate because of the heavy support for corn ethanol in Congress.
A fifth of the nation’s corn crop is now used to brew ethanol for motor fuel, and as farmers have planted more corn, they have cut acreage of other crops, particularly soybeans. End result cooking oil shortage and wheat shortages.
Corn prices are costing the ethanol producers, who are struggling to make every penny they can, as corn’s record-setting price increases outpaces the price of ethanol, currently at around $2.50 a gallon.. Also, with oil prices hovering around $115.00/barrel, the end result can only mean that ethanol prices will increase. How will this offset the cost of gasoline as ethanol was intended to do? Tell me how this will happen.
Gee, even the ethanol producers will continue to lose money if corn prices remain high or go higher. Since the government pays the kickback to the producers, the American consumer will continue to pay through the nose on all retail markets. The small upstart ethanol producers will be hammered and only the mega producers like ADM will survive the higher costs. Construction of new ethanol producing plants came to a screeching halt at the end of 2007.
What is happening to corn prices? If corn prices go over $5.00/bushel, then the case for corn ethanol is not a viable alternate fuel source. Corn supplies are tight and will get tighter as the year progresses. Corn prices have risen about 30% already this year as corn stockpiles are being deleted and the pressure for more grain tonnage continues. Due to these factors, ethanol prices will continue to rise. Farmers are planting less corn this year. Why are the farmers planting less corn this year? Just how much is a farmer making when you compare his income with ADM (the largest ethanol producer in the U.S.)?
The making of corn ethanol was supposed to help us with our fuel woes, but this has only exposed the environment and our country to other serious issues that have to be addressed. Are we going to eat or produce a subsidized fuel that will only make the situation worse over the long haul? I am totally committed to saving the planet, but at what cost? Folks, this is really happening. The subsidies must be deleted from the production of corn ethanol. Ethanol must stand the test of time to prove its ability to be a sustainable alternative fuel.
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Wayne Smallman posted on April 23, 2008:
To some extent, bio-fuels are like electric cars; they’re a false economy.
For now, that’s true. But I’ve been reading good things about the refinement process (genetically engineered bacteria) as well as GM crops, which is contentious in its own right.
What’s stressing bio-fuel as a viable fuel source is that we’re leaving it pretty late. We should have been looking at such things 20 years ago, so that transition from fossil to bio would have been more smooth.
In time, we’ll get this right, but for now, it’s not really us in Europe and the US that’s going to suffer, but those that are already suffering, such as Africa…
Corn Ethanol Creating Famine? posted on April 23, 2008:
[…] Read more Chemically Green » Corn Ethanol: The Fuel to Higher Food Prices […]
chemicallygreen.com posted on April 25, 2008:
@Wayne Smallman: thnaks for the comments.
You are correct. Unfortunately, people are suffering due to grain shortages and countries hoarding their food supplies. Corn ethanol has been pushed on the American public for many reasons money and greed, but not because it can help out lowering the price of gasoline.
donna gilliam posted on May 1, 2008:
I am probably going to show my ignorance on this subject by asking this question, but here goes: Why can’t the farmers be paid more to produce soybeans and wheat, and would this help?
chemicallygreen.com posted on May 4, 2008:
@Donna Gilliam: Thanks for your comments and question. The reason the farmers have gone to growing all corn for ethanol is the subsidites being paid for corn ethanol. It is simple economics. Growing corn pays more to the farmers than soybeans and wheat crops. With corn prices going over $5 and 6.00 per bushel, the other crops have been delegated to the back of the pack. The subsidities for corn needs to be dropped. The U.S. government in all their wisdom did not see what would happen to food prices when they signed off on paying kickbacks for corn ethanol.
Disbelief posted on June 16, 2008:
From a blog on this website: “and yet the U.S.D.A. says food prices have only been affected slightly by corn ethanol and bio-fuels.” The corn that is used for ethanol is different than that used to feed human beings.
chemicallygreen.com posted on June 17, 2008:
@Disbelief: Appreciate your comments. I have heard this argument many times, but if you are growing ethanol corn 100%, then what happens to the supply of corn that is consumed by humans and fed to animals as feed? What about soy beans and wheat? If farmers are planting ethanol corn, who is going to take up the slack for the food products we need?
Are you paying less for your food this year? Do you think food prices are going to go down as oil prices rise?
I guess our brilliant USDA will make a statement next week about food prices only slightly effected as the 2008 corn and soy bean crops in the mid-west have been flooded and mostly destroyed.
* A World Bank study estimated that corn prices “rose by over 60% from 2005-07, largely because of the U.S. ethanol program” combined with market forces.
* An Iowa State University analysis of Chicago Board of Trade data found that implied volatility of corn prices had reached 35% by February 2008, up from 32% in 2007, nearly 29% in 2006 and 22% from 1997 to 2005. The gains were attributed in the Iowa State study to “increased demand for corn from the ethanol industry.”
* The International Monetary Fund estimated recently that the shift of crops out of the food supply to produce biofuels accounted for almost half the recent increases in global food prices. The IMF estimates that global food prices rose 43% in the 12 months ending in March 2008.
Our government chose the wrong white horse to ride using corn ethanol as an alternative fuel source. Disbelief, take a look at our current draft about “Flooding and HIgh Corn Prices” and check out the link about corn ethanol that I recommend everyone read. The USDA, like the rest of our government is in a black hole. After all the flooding with corn selling for over $7.00 per bushel (all time high), will the USDA say food prices have only been slightly affected? I will be in total disbelief. What about you?