The Impact of Biofuels
By E. Ralph Hostetter (06/22/07)
As the United States involves itself more deeply in biofuel production questions are arising as to the long-range effect such programs can have on America's food source and economy.
The production of biofuels to solve an energy problem involves placing one of the two most sensitive commodities in the economy, food, at the disposal of the other most sensitive commodity, energy.
Both are so sensitive, due to price volatility, that they were removed from the list of commodities that comprise the Consumer Price Index (CPI) used by the Federal Government to calculate the rate of inflation in the United States. The American public is told by our government the rate of inflation in 2006 was only 2.2%. However, when price increases in food and energy were factored in, the reality was that actual inflation was 4.8%, or an increase of 118% above what the nation was told.
In reality, energy is consuming a food supply system in order to sustain its own energy supply system used to fuel automobiles. The energy supply system's purpose from the outset was to supply energy to all systems, not draw from them.
At the heart of this conflict of resources is the American food source that affects most others: corn. Corn was selected as the most adaptable and richest source of energy for biofuel — ethanol. Corn was readily available, easy to transport and produced more energy than other feedstock such as cellulose, grasses, wood chips, crop residues, waste paper and municipal solid waste.
Today, 60% of the American corn crop is fed to U.S. livestock. Therefore, as the price of corn is forced up by the demands of ethanol production and many natural causes, such as weather, so is the price of meat, poultry, eggs, milk and more than 3,500 other products Americans use every day.
Prices for nearly all these products are increasing. Prices across the board were up 6% in 2006. At the outset of biofuel production, corn prices doubled but have settled back to a 33% increase in 2007.
Estimates suggest milk at $4.00-plus per gallon and a general increase of some 10% across the board for other corn-sensitive products in the foreseeable future.
Corn production for the nearly 7 billion gallons of ethanol production at the present time requires about 16 million acres, or 20%, of the total 80-plus million acres presently in corn production. Ethanol plants presently under construction and expansion will add another 6 billion gallons to a total production of 12-plus billion gallons by 2012. This will require an additional 16 million acres of corn-production land, thus consuming 40% of 2006 corn acreage available.
A five-fold increase in biofuel production is mandated in Senate Bill 1419, introduced by Senator Harry M. Reid (D-NV). This increase to 36 billion gallons of ethanol by 2022 would require nearly 100 million acres of corn, approximately a 25% increase above the present 80-plus million acres. Additional farmland would be found at the expense of soybeans, cotton and other crops and their prices would rise accordingly.
Iowa State University Professor of Agricultural Economics Robert N. Wisner observes when "a staggering 55 ethanol plants in Iowa" become fully operational they will virtually consume the entire Iowa corn crop. The U.S. supplies 70% of world corn exports of some 55 million tons of corn. It is now estimated that ethanol production in 2006 consumed about 50 million tons.
There are many voices in the agricultural industry who are taking exception to questions raised by many Americans as to the wisdom of placing food resources at the disposal of energy resources.
Lynne Hoot, Executive Director of the Maryland Grain Producers Utilization Board, points out that a developing new trait of drought resistance and nitrogen utilization in corn will provide 15 million tons of corn by 2015, enough to provide 15 billion gallons of ethanol. This is commendable.
However, Senator Reid’s mandated goal is 36 billion gallons of ethanol by the year 2022. Very rarely do nations take their basic food source and convert it to an energy source when all sorts of energy sources are staring them in the face. Alternative sources of proven quality, safety and economy are available for immediate development.
There is, of course, the traditional energy source, petroleum. Vast reserves lie in offshore areas surrounding America and in untouched identified reserves in Alaska. Some 200 billion barrels of crude oil are waiting to be brought to the surface.
Atomic energy would not only provide all our electrical energy but lead to the development of electric automobiles. Atomic energy would replace all coal-fired electrical generating plants, saving hundreds of billions of dollars in the electrical bills of U.S. citizens while reducing America's main source of man-created pollution, CO2, by 60%. The rest of the world is doing this. China is building five new atomic plants with U.S. Westinghouse technology and plans to build 30 more.
According to a bulletin recently released by Netherlands-based BioeCon, a scientific network, Xu Dingming, Deputy Director of China’s National Energy Group, on June 14, 2007, said “China has ruled out the production of ethanol from food crops, since that program will not be the path to meet the country’s energy needs”
Obviously there are many issues yet to be resolved in the ongoing biofuel debate.
E. Ralph Hostetter, a prominent businessman and publisher, also is an award-winning columnist and Vice Chairman of the Free Congress Foundation Board of Directors.
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