Energy Tribune

The ethanol apologists refuse to face the facts. Soaring demand from the ethanol sector has helped push prices for all grains dramatically higher. Over the past two years, corn prices have more than doubled and soybeans have nearly tripled. And yet the ethanol boosters continue to claim that the biofuels business is not to blame.

When asked in April how biofuels are affecting food prices, Sean O’Hanlon, executive director of the American Biofuels Council, replied, “They really don’t. He went on to say, “Ultimately, there is more food available because of biofuels, rather than less.” Other ethanol boosters have been making similar claims.

It’s true that several factors are driving food prices higher, including growing global grain demand, poor crops in other countries, rising energy prices, and the weak dollar. That said, it’s abundantly obvious that the key variable in the food-price equation and the one that easily could have been avoided is the ethanol scam.

Since 2000, the amount of corn used to make ethanol has increased nearly six-fold. By next year, according to the National Corn Growers Association, some 4 billion bushels of corn – about one-third of America’s expected crop – will be used to make motor fuel.

In February, the Federal Reserve Bank reported that food prices in 2007 jumped by 4.5 percent, the “largest in nearly two decades.” The Fed placed much of the blame on corn ethanol: “Food prices accelerated in response to strong world demand and high demand for corn for the production of ethanol.”

On March 11, the U.S. Department of Agriculture released its report on world agricultural supply and demand. It estimates that global grain demand will grow by 5.4 percent this year. Fully half of that growth will come from U.S. consumption of corn for ethanol.

On April 9, the World Bank released a report that stated, “Increased bio-fuel production has contributed to the rise in food prices.” It continued, “Almost all of the increase in global maize [corn] production from 2004 to 2007 (the period when grain prices rose sharply) went for bio-fuels production in the U.S.”

In a report released a year ago, Iowa State University’s Center for Agricultural and Rural Development estimated that the ethanol mandates have increased every American’s food bill by about $47, due largely to higher grain prices. Last month, a report commissioned by the Coalition for Balanced Food and Fuel Policy, a group that represents meat, dairy, and egg producers, stated that, counting subsidies and higher food prices, the ethanol scam will cost each American about $106 this year.

The anti-ethanol forces are growing. In late April, Texas Gov. Rick Perry, a Republican, requested a waiver from the federal ethanol rules, saying that the “misguided mandate is significantly affecting Texans family food bill.” A press release issued by his office said the mandates were creating “artificial demand” for grain that “is devastating the livestock industry in Texas.”

No matter how much U.S. or world grain production gets diverted to make motor fuel, it will never make a large dent in global oil needs. According to the latest U.S.D.A. estimates, total world grain production – including corn, wheat, soybeans, rice, millet, and other grains – is currently about 2.1 billion tons per year. Each ton of grain yields about 105 gallons of ethanol. Thus, converting all of the world’s grain into ethanol would yield about 220 billion gallons of ethanol per year, the gasoline equivalent of about 9.5 million barrels per day. That’s only about 11 percent of current global oil demand.

The ethanol mandates that have been foisted on American taxpayers are not just fiscal insanity, they are immoral. Congress has created a system of subsidies and mandates that requires the U.S. to burn food to make motor fuel, at a time when there is a global shortage of food and no global shortage of motor fuel.

Therein lies one of the real perversities of the ethanol mandates: as the global economy heads for rougher times thanks to higher energy prices and the subprime mortgage meltdown food prices are soaring. And those food prices will increase anxiety among consumers, who will further reduce their discretionary spending. With the ethanol scam, Congress has created a food-eating Frankenstein. The only question now is: can it be killed?