Energy vs. Food

This is a glimpse of the future...



China blocks food for biofuel

By George Reynolds



12/06/2007 - Chinese biofuel producers should only use non-food crops, the government said yesterday, following fears of shortages and further price rises that could occur as demand for greener energy increases.Biofuels are seen as a potential alternative to fossil fuels, because they can be manufactured from sustainable crops including corn, wheat, sugar, cassava, sweet sorghum, and oilseeds.The moratorium will ease manufacturing concerns about competing for ingredients being used to make ethanol and biodiesel. Corn is currently accounts for 90 per cent of the inputs in Chinese ethanol manufacture, and has sharply risen in price over the past few years due to subsidies and high crude oil prices.Moreover, last year's 43 per cent rise in the price of pork, China's principal meat, due to increasing feed costs, has pushed officials to act."Food-based ethanol fuel will not be the direction for China," said Xu Dingming, an official of the National Energy Leading Group, at a energy seminar held this week, according to the Xinhua News Agency.Biofuel manufacturers will now need to source non-food crops, such as cassava and sweet sorghum used ....(follow the link for complete article)



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Ethanol and biodiesel will have a dramatic impact on food prices in this country over the next few years. I have posted some of my thoughts on this in the past. Fuel independence may create food dependence if we continue to focus those efforts on biofuels. Are we as a country willing to become dependent on South America for our grains? That may not be an issue if Brazil continues with its efforts to produce ethanol. We are heading for a global food crisis. U.S. citizens will pay a higher percentage of their disposable income for food than ever in the history of this country. What will the impact be on countries that suffer from chronic food shortages today?

There have been numerous issues to criticize the current administration and Congress over. I think the subsidies to encourage biofuels may be the biggest one. The money spent subsidizing ethanol would be better spent on nuclear, wind, or solar power generation. Biofuel money should be restricted to garbage and human waste. Subsidizing the use of crops for biofuels is an error in judgment that will have huge impact on our food supplies in a very short time. That impact is in fact already occurring although there is a significant lag before it will be felt in the consumer marketplace. The sad thing is, it will not lower gasoline prices and may contribute to their rise due to legislating blends both at the Federal and State levels. This, at the same time that it is raising food prices.

The first impact that will be felt is in the cost of proteins. This includes all meats and beans. The impact to grain-based foods will be more slowly realized. This seems backward at first glance. However, due to the small impact of "in-the-field" prices for grains on the cost of a finished loaf of bread, the impact will be minimal in spite of significant grain price increases. However, the cost of feeding livestock has increased tremendously based on the speculative impact of corn conversion to ethanol. There has also been secondary impact on the price of feed fat which is a rendered energy source similar to lard that is a component of many animal feeds -- such as pet foods. This is because of the utilization of tallow for biodiesel production. Just get ready. The price of your hamburger is about to double. It will only take about 6 -9 months for the initial impact to begin to filter through the production cycle.

The potential impact of significantly higher food prices could quickly spread to the housing market. Families will have less disposable income. Foreclosures may become as common as they were in the 80's at the height of the S&L crisis. Prices will plummet. The housing bubble will burst. The impact will then ripple through the financial sectors potentially causing bank failures.

OK. I guess that's a bit of a gloom-and-doom view, but it is also realistic. Cheap and abundant food has been a significant component of the economic success of this country. Current alternative energy policies are threatening our future food supply. Congress and the President need to think again about how we achieve energy independence.