Home Delivery

Ethanol vs. food debate growing

Corn for fuel leaves less to fill stomachs

By Joshua Boak | Tribune Reporter

May 1, 2008

Article tools

E-mail

Share
- Digg
- Del.icio.us
- Facebook
- Fark
- Google
- Newsvine
- Reddit
- Yahoo

Before milk prices started spiraling, before gas prices passed $3.50 and before food riots broke out in several countries, ethanol was the darling of energy alternatives. It gave jobs to rural communities and offered an alternative to foreign oil.

Now, ethanol is a source of bitter controversy, as rising consumer prices have led to new questions about whether corn can serve as both food and fuel without dramatically upsetting the foundations of America's economy.

Echoing across the world this week is a significant, emotional debate about the future of food as fuel, with corporate leaders, farmers, the White House and the United Nations acknowledging the consequences of record food prices, a phenomenon that follows the diversion of corn into ethanol.

While Congress finalizes a farm bill that will continue underwriting the ethanol boom, the UN has set up a food task force to avoid social unrest "on an unprecedented scale" as a result of higher prices.

Closer to home, executives connected to the ethanol industry are feeling the pressure, defending their efforts to produce an alternative to oil. That was a running theme at a three-day biotechnology conference in Chicago this week.

As the chief executive of Poet, the country's largest ethanol producer, Jeff Broin blamed oil prices climbing as high as $120 a barrel for food inflation, rather than the use of corn as a fuel. He said that the kinds of scientific improvements discussed at the conference eventually will increase harvests and resolve the debate.

"Some would say we don't have a shortage of land to produce grain, we have a shortage of biotechnology," Broin said.

The pressure being put on ethanol is coming from many sides, but this week the focus was on companies that came out as financial winners and losers, depending on whether they are chiefly buyers or sellers of corn.

Archer Daniels Midland, the Decatur, Ill.-based agricultural giant, saw a 42 percent increase in its quarterly profit, to $517 million, amid volatile grain markets. Acknowledging high food prices, Patricia Woertz, the company's chairwoman and CEO, made a passionate defense of the ethanol industry that has benefited the company.

"Retreat from biofuels is wrong; it's dangerous, it's a mistake," Woertz said. "It won't fill anybody's stomach and won't fill any gas tanks."

But Tyson Foods Inc. was saddled with a $5 million quarterly loss because of higher feed costs, and CEO Richard Bond fingered ethanol as the cause. He questioned the investment in a form of energy that will never displace oil's role in the economy.

"In 2007, ethanol production will replace only 3 percent of U.S. oil imports," Bond said. "The fact is we can't grow enough corn in this country to make a dent in our petroleum dependency."

President Bush sympathized with the families who exhaust their paychecks on groceries and gasoline, but he remains committed to the possibilities for ethanol.

"The high price of gasoline is going to spur more investment in ethanol as an alternative to gasoline," Bush said Tuesday. "And the truth of the matter is it's in our national interests that our farmers grow energy, as opposed to us purchasing energy from parts of the world that are unstable or may not like us."

Farm bill to keep subsidy

No one is predicting whether there is a specific point at which the commitment to ethanol might wither under high food prices. But for now Congress remains committed to a farm bill that supports it.

The bill, which appears ready for passage, would fund $1 billion worth of research into alternative fuels over the next decade. It would slightly lower the federal tax break on ethanol by 6 cents, to 45 cents a gallon, while also shielding America from ethanol made out of Brazilian sugar by continuing a 54-cents-a-gallon tariff on imported ethanol.

A recent analysis estimated that government subsidies for ethanol reached as high as $8.4 billion last year, a sum showing that all stages of ethanol production and consumption depended on some form of public support rather than the free market.

"There's not very much value created out of that," said Doug Koplow, a consultant on energy subsidies who wrote the analysis. "You're getting a slight displacement in petroleum. You're getting higher farm income, but you're not really making a meaningful long-term contribution to solving our energy problem."

While corn growers identify crude oil prices as the true culprit behind food inflation, they note that ethanol and corn worth more than $6 a bushel lets them avoid the traditional government subsidies.

"It's really providing us an opportunity to make some money from the marketplace and not rely on the government programs," said Ron Litterer, president of the National Corn Growers Association, who tends 1,000 acres of corn and 500 acres of soybeans in Greene, Iowa. "We think that's a positive thing."

Litterer intended to start planting Thursday, making his contribution to the more than 12 billion bushels of corn expected to be harvested this year. Almost a third of that harvest will go to ethanol, compared with about 14.6 percent in 2005, based on Agriculture Department numbers.

Little impact on gas costs

Part of the problem for ethanol is that its supporters argued that having an alternative fuel would reduce gasoline prices, which reached yet another high of $3.62 a gallon nationwide on Wednesday, according to the AAA.

While ethanol might cause domestic gasoline refiners to limit their prices, it is likely too small a portion of the global oil market to have a meaningful impact or offset higher food prices, said Thomas Elam, president of the consultant FarmEcon.

"I don't know what it's going to take, but this situation with food prices is like putting the frog in the cold water and turning up the heat," Elam said.

In countries such as Egypt, Haiti and Indonesia, that pain already has spilled into riots that prompted the creation of the UN task force. And outside of places such as the Jewel-Osco in the South Loop, the same forces are slowly building to an uncertain end.

"I was thinking just yesterday, when food was cheap was in the good old days," said Ellen Janka, a 62-year-old buying groceries Tuesday. "Maybe this is nature's way of teaching us not to eat so much."

And as Janka jumped in her Cadillac SUV, she concluded, "It's kind of stupid to turn food into gasoline."

Tribune reporter Deanese Williams-Harris contributed to this report.

jboak@tribune.com

Get breaking news alerts!

Would you recommend this?

Rate it: