Food-vs.-fuel debate changing

Cattle Market & Farm Reports, Editorials
Aug 29, 2008
by DTN


—Argument shifting from bushels to acres

Heavy rains flooded Midwestern cornfields in June, raising questions about what a severely crippled corn crop would mean to the ethanol industry. But improved seed hybrids and ideal weather may be turning the food-versus-fuel debate on its head.

An August USDA production forecast of a 12.3-billion-bushel corn crop in the face of seemingly catastrophic corn losses in some parts of the Corn Belt has left ethanol supporters scratching their heads.

"It was surprisingly high," said Rick Tolman, president of the National Corn Growers Association (NCGA). "Every year we have better germplasm traits that make that plant less susceptible to the environment. The flooding was bad, but when it dried, we had good moisture. We’ve had a pretty cool summer, and the heat stress is not there."

The flooding raised doubts about the future of the ethanol industry and the ability of farmers to overcome crop disasters to continue meeting demands for food, feed and fuel.

If the USDA forecast holds up, however, the debate could be shifting.

Bradley D. Lubben, an assistant professor and extension public policy specialist at the University of Nebraska-Lincoln, said perhaps the focus should be on future land use.

"The current food-versus-fuel debate is a great illustration of the role of politics over economics," he said. "As the adage goes, politics always trumps economics. In the short run, we are calling it a food-versus-fuel debate because the public perceives that the cause of food price rises can all be blamed on fuel prices and policies. That significantly shortchanges the analysis."

One way to characterize the issue, Lubben said, is that "we are not competing for bushels; rather, we are competing for acres. The true test of supply response will be how we allocate acres among multiple uses, including crops, forages, grazing land and habitat, among other uses."

Talk about how a transition away from corn ethanol to cellulosic ethanol will solve the food-versus-fuel problem is "an argument over bushels," he said.

"The real argument will be over acres, and at present technologies, gallons of ethanol from cellulose could require as many acres of grasses and biomass as gallons of ethanol from starch from corn," Lubben said.

For instance, in 2007, higher market prices encouraged more corn production, and producers planted 15 million more corn acres.

In 2007, those extra corn acres largely came from other crops, Lubben said, mostly from soybeans and some cotton. In 2007 and 2008, he said, the prices for other commodities "joined the rally" and enticed acres back into other crops.

Hosein Shapouri, an ethanol economist with USDA, said there are about 36 million acres of land in the Conservation Reserve Program (CRP). About 8 million acres of the CRP land are suitable for production of corn and soybeans, he said.

In addition, there are 60 million acres of cropland in pasture, Shapouri said, and some of that acreage could be used for production of corn, soybeans and other commodities.

Corn hybrid technology has made drastic improvements in the past 60-plus years. According to USDA, 85 million corn acres were harvested in 1944—the same as 2007.

Yet the total corn production increased from about 2.8 billion bushels in 1944 to around 13.1 billion bushels in 2007, along with a dramatic increase in bushels per acre from 33 to 151, according to USDA numbers.

By 2030, NCGA’s Tolman said, many of the major seed companies have told corn growers to expect 300-bushel corn to be possible.

"Agronomists shake their heads at that number," he said, "but seed companies say it’s doable."

Tolman said the corn industry has changed profoundly from the development of a biofuels industry. Farmers, however, believe they should have been getting $5 corn all along, and hope to see those prices even after cellulosic ethanol begins commercial production within the next five to 10 years.

"It takes stronger prices to produce," he said. "There was no future in $2 corn. We see the cellulosic piece as evolutionary and not revolutionary. Frankly, corn is the first source of cellulose. We want corn to move into a higher value."

That future could include using corn to produce more industrial chemicals and biodegradable plastics, for example.

Most cellulosic-ethanol technologies in development right now will rely heavily on the ability of the U.S. farmer to produce so-called ‘energy crops’ such as switchgrass, miscanthus, prairie grass, wheat straw, corn cobs and, someday, corn stover, or the leafy part of the corn plant.

Chris Hurt, an agriculture economist at Purdue University in Lafayette, IN, said emergence of biofuels has changed the agricultural landscape.

"Fuel and food markets are now fairly closely linked by biofuels," he said. "But this is not to say that each will have all the grains and soy products they would like to have, or that usage in each category will be at the same levels as pre-2006."

The ethanol-investment surge was a phenomenon moving from a planned capacity of about 6.1 billion gallons at the start of 2006 to a planned capacity of about 13.6 billion in August, according to the Renewable Fuels Association.

So the surge in corn demand is coming in the 2007 to 2009 crops and totals about 3 billion added bushels of potential usage over those three crops, he said.

Hurt said it’s rare to experience a demand surge "as large and well defined as the ethanol surge we are going through right now." As a result, he said that a "less dynamic period" for corn will unfold in 2010 and beyond.

"I think it is also clear that food will compete effectively with fuel for corn supplies," Hurt said. "In fact, in the long-run, food will probably be able to outbid fuel because of the greater overall value of food compared to fuel uses for corn." — DTN

-vs.-fuel debate changing.