Monday, May 19, 2008

Food vs. Fuel

I received this article in my e-mail today. Thought I would share it with my readers. it is written by Murray Campbell, CEO of First United Ethanol Incorporated. It trys to clear up may of the misconceptions concerning the use of corn for ethanol production and the current high food costs. Enjoy.

Indiana Ag Director: Food vs. Fuel Hype Requires Rational Intervention

Pick up any publication today and you will see alarming claims about corn-ethanol driving the world into famine. Two years ago, the same publications were heralding ethanol as the savior of America's energy crisis. The truth is somewhere in between, and it is time for a calm, rational analysis of ethanol's contributions and limitations. The best way to begin a rational discussion is to address some of the biggest myths about ethanol.

Myth #1 -- Ethanol is a perfect fuel and is the "silver bullet" the U.S. needs.
• Ethanol is one part of our overall energy strategy to reduce dependence on foreign oil.
Ethanol is on track to displace approximately 10 percent of U.S. fuel usage.
That's a big deal. At current crude prices, that means more than $35 billion staying in the United States instead of going to OPEC.
• But, there is no "silver bullet" for our nation's energy crisis.
Ethanol does have some real issues, like transportation of the finished product and the impact on other corn-based industries. But the biggest challenge is addressing these issues with innovative ideas. Too many in the industry want to rationalize the issues away, looking instead through rose-colored glasses.

Myth #2 - Ethanol is driving a world famine and record food prices.

• Ethanol is not driving a world famine. The world supply of corn is still greater than demand.
That means we aren't running out of corn. In fact, the United States ended the last crop year with almost 9 percent reserve in corn, which is only slightly lower than average. The corn-consuming industry had become accustomed to much higher reserves of 15-20 percent, which drove corn prices below production costs and the accusation that the U.S. was "flooding" the world market with cheap grain.
• Undoubtedly, ethanol has contributed to tightened corn supplies and higher corn prices.
But increases in corn price are only partly explained by ethanol and only account for a small increase in retail food prices. An objective analysis determined that ethanol merely contributed to a 0.25 percent increase in U.S. food prices. The bigger culprits in higher food and corn prices are increased demand for food from growing countries like China, the impact of higher fuel prices on food transportation and a weakened dollar.

Myth #3 -Ethanol is destroying the rainforest.

• A group of university researchers have concluded that as the world needs more corn, it can only produce it by using more land, and that land will come only by tearing down the rain forest.
This argument fails to recognize the impact of innovation on farming. For example, in the 1930s the United States had more land in corn production than today, but now we produce 6 times more corn on about 10 percent less land. Use of improved fertilizers and other genetic innovations has driven this change and will continue to do so. We don't need hundreds or millions more acres of land to produce more corn. If anything, the current market pressure is accelerating the rate of innovation with some predicting a doubling of corn yields in the next 10 years.

Myth #4 - Ethanol is guzzling water.

• It takes 3 gallons of water to produce a gallon of ethanol. It takes 66 gallons of water to refine one gallon of oil. Therefore, to produce a gallon of gas requires 22 times the amount of water that is needed to produce a gallon of ethanol.
• A university researcher is now trying to make the argument that it actually takes 1,700 gallons of water to make a gallon of ethanol. However, he arrives at that number by allocating for point source water, or rainfall. His number incorporates the amount of rain that falls on a field of corn. Regardless of how the field is used, the rain will still fall. Through technology and innovation more than 95 percent of all corn is grown with no water other than rainfall.

Corn-ethanol is making a meaningful contribution to our country's efforts to reduce dependence on foreign oil; without it our imports of refined gasoline would more than double. Ethanol is not without issues, including the assumption it's a "silver bullet." And ethanol's success has driven cynics and naysayers to surface. But the most important thing for Hoosiers to remember is this. Corn-ethanol, as with all alternative energy, has been a major contributor to new economic vitality bringing more than $2 billion in new investment, hundreds of new jobs and millions in new farm income. Through innovation we can reduce our dependence on foreign oil and see continued economic growth from agriculture - and that is a fact.

No comments: