Growing use of corn for conversion to fuel may push up world prices of food By Finfacts Team May 25, 2006, 13:17
The US, the world's largest exporter of corn, will use as much or more of the grain for conversion to ethanol in 2007 than it will sell abroad, according to estimates by the Department of Agriculture (USDA).
As gasoline prices rise, farmers are diverting more of their output to producing fuel rather than food or feedstock for animals. The new estimate highlights the growing competition between food and fuel that could push up the price of food globally. .
The USDA says that about 55m tonnes of corn will be converted into ethanol, compared with exports averaging 40m-50m tonnes over the past 15 years. This would be up from an estimated 41m tonnes last year - a quantity of corn that could feed 131m people for a year. The US accounts for 70 per cent of world corn exports.
"This year looks like being the first time ever that as much or more corn is converted into ethanol than exported. If oil prices stay high, it will propel this trend much further," USDA economist Keith Collins, said in an interview with the Financial Times.
US energy legislation requires ethanol production to increase to 7.5bn gallons by 2012, requiring about 68m tonnes of grain - more than the total grain harvest of Canada, Brazil or Indonesia. US output supplies just 3 per cent of US cars, a figure expected to rise significantly.
Prices of corn have risen by close to 20 per cent in recent weeks as world grain stocks have fallen to their lowest level since the early 1970s.
Use of sugar for fuel in particular in Brazil, have pushed sugar prices to a 25-year high. About 10 per cent of world sugar output is now used to produce ethanol. The level for corn is just 3 per cent for corn but has been rising fast and some experts believe it could soon reach a tipping point.
Ethanol
Ethanol is an alcohol-based alternative fuel produced by fermenting and distilling starch crops that have been converted into simple sugars. Feedstocks for this fuel include corn, barley, and wheat. Ethanol can also be produced from "cellulosic biomass" such as trees and grasses and is called bioethanol. Ethanol is most commonly used to increase octane and improve the emissions quality of gasoline.
Ethanol can be blended with gasoline to create E85, a blend of 85% ethanol and 15% gasoline. E85 and blends with even higher concentrations of ethanol, E95, for example, qualify as alternative fuels under the Energy Policy Act of 1992 (EPAct). Vehicles that run on E85 are called flexible fuel vehicles (FFVs) and are offered by several vehicle manufacturers. See the ethanol vehicles page for more information on FFVs.
In some areas of the United States, lower concentrations of ethanol are blended with gasoline. The most common low concentration blend is E10 (10% ethanol and 90% gasoline). While it reduces emissions, E10 is not considered an alternative fuel under EPAct regulations. For more information on E10, see the ethanol blends page.
The US and many other countries are very interested in cellulosic biomass as a potential feedstock for ethanol. Cellulosic biomass refers to a wide variety of plentiful materials obtained from plants—including certain forest-related resources (mill residues, precommercial thinnings, slash, and brush), many types of solid wood waste materials, and certain agricultural wastes (including corn stover)—as well as plants that are specifically grown as fuel for generating electricity. A report prepared for the U.S. Department of Energy and USDA in 2005 suggests that, by the middle of the 21st century, the United States should be able to produce 1.3 billion dry tons of biomass feedstock per year—enough to displace at least 30 percent of its current petroleum consumption.
Harnessing cellulosic biomass to produce ethanol will require the development of economically viable technologies that can break the cellulose into the sugars that are distilled to produce ethanol. No one knows for sure how long it will take to develop these technologies, although the more optimistic predictions are in the neighborhood of 5-10 years. To expedite the achievement of this goal, the Energy Policy Act of 2005 directs incentives specifically toward the use of cellulosic biomass as a feedstock for renewable fuel.
For the purpose of meeting the Renewable Fuel Standard, 1 gallon of cellulosic biomass ethanol is treated as 2.5 gallons of renewable fuel through the end of 2012. The Act also provides for research, development, and demonstration projects concerning cellulosic biomass, and it mandates that at least 250 million gallons of renewable fuel be produced per year using cellulosic biomass, beginning in 2013. Until cellulosic biomass is successfully commercialized, however, corn will almost certainly remain the primary feedstock for U.S. ethanol production.
