Capital News Service

of the Michigan State University School of Journalism

Higher prices feed food-versus-fuel fight

By YANAN CHEN
Capital News Service

LANSING—As the United Nations announced record-high food prices in January, a new round of debate in Michigan centered on the connection between food and energy.

Source: National Agricultural Statistics Service

For Michigan farmers, the issue is the use of a growing proportion of the corn crop to make ethanol.

Michigan has five operating ethanol plants and two more under construction, according to Jeff Sandborn, vice president of the Michigan Corn Growers Association. In 2009, approximate 27 percent of Michigan corn was used to produce ethanol.

Sandborn recently told the association that the argument that “if we use corn for ethanol production, there won’t be any corn left to feed livestock” is a misconception.

He said, “All the nutritional value of corn is maintained in distillers grains,” a byproduct of the ethanol production process, “and is returned to the livestock industry as high-quality feed.”

The Food and Agriculture Organization, a UN agency, reported that in January, the Cereal Price Index was the highest since July 2008. The Sugar Price Index was up 5.4 percent from December. And the oils/fats price index was nearing the June 2008 record. The World Bank described food prices as being at “a dangerous level.”

In addition, other factors like extreme weather, imports and fuel prices lead to the fluctuation of food prices.

The Corn Growers Association calls criticism that biofuel will increase food prices “patently false and misguided.”

It said, “Ethanol production uses only the starch portion of the kernel, which is abundant and relatively low in value. Also ethanol is produced from field corn fed to livestock, not sweet corn grown for humans.”

The American Farm Bureau Federation said that without increased biofuel production, oil and gasoline prices would be 10 to 15 percent higher.

Ethanol, as one of the most common biofuels, saves U.S. consumers at least $38 billion in fuel costs each year, the federation said.

In a report, Joachim Von Braun, director general of the International Food Policy Research Institute in Washington D.C., said increased biofuel demand accounted for 30 percent of the increase in grain prices between 2000 and 2007.

If food prices rise, the report also said, low-income households will lose benefits on the food consumption side but gain little on the energy side if energy prices decline.

Scott Swinton, an agriculture economist at Michigan State University, said he is unaware of any studies of the latest price rise. But its causes are probably the same as in 2007 — a combination of supply and demand factors.

About two-thirds of the 2007 price spike could be attributed to a rising standard of living and improving diets around the world, he said.

Another important factor that accounted for 30 percent of the rising food prices was biofuel demand, Swinton said.

“The biofuel demand is driven by two factors, and the first one is oil prices. When oil prices arrive at a high level, ethanol and biodiesel become cost-effective substitutes,” he said, adding that U.S. policies spur the demand for biofuels, which is the second factor.

“The key debate is about the effect of corn grain ethanol, because corn grain is not a very greenhouse gas-efficient biofuel,” Swinton said.

Swinton also said it’s inefficient for government to say a particular industry is the way to reduce greenhouse gas emissions. “It is a good idea to encourage research, and it is a bad idea to require the use of certain kinds of alternative energy,” he said.

The World Bank has warned that the continuous rise of food prices will drive more people into poverty and said using “less food-intensive biofuel technologies” will be a high priority to mitigate higher prices.

© 2011, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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