Food Vs. Fuel - National Corn Growers Association

National Corn Growers Association

US government subsidies for making ethanol from corn have been attacked as the main cause of the food vs fuel problem. To defend themselves, the US corn growers association has published their views on this issue. They consider the "food vs fuel" argument to be a fallacy that is "fraught with misguided logic, hyperbole and scare tactics."

Claims made by the NCGA include:

• Corn growers have been and will continue to produce enough corn so that supply and demand meet and there is no shortage. Farmers make their planting decisions based on signals from the marketplace. If demand for corn is high and projected revenue-per-acre is strong relative to other crops, farmers will plant more corn. In 2007 US farmers planted 92,900,000 acres (376,000 km2) with corn, 19% more acres than they did in 2006.

• The U.S. has doubled corn yields over the last 40 years and expects to double them again in the next 20 years. With twice as much corn from each acre, corn can be put to new uses without taking food from the hungry or causing deforestation.

• US consumers buy things like corn flakes where the cost of the corn per box is around 5 cents. Most of the cost is packaging, advertising, shipping, etc. Only about 19% of the US retail food prices can be attributed to the actual cost of food inputs like grains and oilseeds. So if the price of a bushel of corn goes up, there may be no noticeable impact on US retail food prices. The US retail food price index has gone up only a few percent per year and is expected to continue to have very small increases.

• Most of the corn produced in the US is field corn, not sweet corn, and not digestible by humans in its raw form. Most corn is used for livestock feed and not human food, even the portion that is exported.

• Only the starch portion of corn kernels is converted to ethanol. The rest (protein, fat, vitamins and minerals) is passed through to the feed coproducts or human food ingredients.

• One of the most significant and immediate benefits of higher grain prices is a dramatic reduction in federal farm support payments. According to the U.S. Department of Agriculture, corn farmers received $8.8 billion in government support in 2006. Because of higher corn prices, payments are expected to drop to $2.1 billion in 2007, a 76 percent reduction.

• While the EROEI and economics of corn based ethanol are a bit weak, it paves the way for cellulosic ethanol which should have much better EROEI and economics.

• While basic nourishment is clearly important, fundamental societal needs of energy, mobility, and energy security are too. If farmers crops can help their country in these areas also, it seems right to do so.

Since reaching record high prices in June 2008, corn prices fell 50% by October 2008, declining sharply together with other commodities, including oil. As ethanol production from corn has continue at the same levels, some have argued that this trend shows the belief that the increased demand for corn to produce ethanol was mistaken. "Analysts, including some in the ethanol sector, say ethanol demand adds about 75 cents to $1.00 per bushel to the price of corn, as a rule of thumb. Other analysts say it adds around 20 percent, or just under 80 cents per bushel at current prices. Those estimates hint that $4 per bushel corn might be priced at only $3 without demand for ethanol fuel.". These industry sources consider that a speculative bubble in the commodity markets holding positions in corn futures was the main driver behind the observed hike in corn prices affecting food supply.