February 24, 2011

A myth is still a myth when it comes to corn and ethanol, food and fuel

And the myths continue...

Food prices are increasing at the grocery store because of ethanol, the uprising in Egypt occurred because of ethanol, ethanol is taking away from our food supply, there would be fewer hungry people in the world if we didn't use ethanol.

We’ve heard it all before (except the Egypt one, but you get the gist). These are just a few of the myths about corn and ethanol in circulation.

It’s notable, of course, that a recent uptick in all this nonsense began about the same time oil prices began to rise – it wasn’t that long ago oil was $60. It has gradually been inching up but topped $100 today for a while, fueled in part by the continued unrest in oil rich regimes around the world.

And, as noted by the LA Times, this run-up in prices will impact all of us and nearly everything we purchase (notably, food).

Does that remind you of 2008?

For a while in 2007-08 (and again recently), some folks tried to blame ethanol and corn for increasing food prices. Yet like before, corn prices plays a relatively minor role in the grand scheme of things. A bit part not even worthy of side kick status.

Remember the World Bank “correction”? Or FAOOr USDA? All concluded that corn prices and ethanol were but a footnote to the real juggernaut to any increase in food prices three and four years ago.

In the end, at least for ethanol, it’s about food AND fuel. While this tends to get lost among the handy sound bites, we need to talk about how food and fuel are being made from the same bushel of corn grown by America’s farmers.

Ethanol companies use about 3 percent of the world’s grain supply for ethanol production and approximately 36 percent of the U.S. corn supply (a corn supply that has grown considerably since 2000 – ethanol doesn’t use more corn from the same-sized pie every year…the pie is getting bigger!).

However, corn ethanol plants also produce distillers grains, a great protein feed for hogs, beef and dairy cattle and poultry. Feeding distillers grains to livestock decreases the amount of other feed ingredients, such as ground corn, corn silage, soybean meal, some hays and other forage, in feed. Although the ethanol industry may use 36 percent of the U.S. corn grain supply, when you add in the millions of tons of distillers grains they also produce to feed livestock, the figures change.

Even countries around the world are catching on – exports of dried distillers grains reached an all-time high in 2010 and will be even higher this year.

The value of corn in food
The Food & Fuel page over at NebraskaCorn.org includes some good points as to the impact of corn prices on some basic foods.

AT $6 corn, a box of corn flakes contains about 8.6 cents worth of corn but the box sells for about $4.00. A gallon of milk costs $2.99. Of that price, dairy farmers receive about 90 cents and about 19.3 cents is attributable to corn. A 2 liter bottle of soda, which contains high fructose corn syrup, contains about a dime’s worth of corn.

Often times packaging (oil) and shipping (again, oil) is considerably more costly than the value of the corn in the box, jug or package.

Reminds me that even the “tub” that holds popcorn at the movie costs more than the popcorn in it. Remember that?

Also remember that even BP acknowledged that biofuels are driving down our dependence on foreign oil. The sooner we get over the ethanol myths and move on the sooner we'll be less reliant on unstable parts of the world for our energy needs.

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