The biofuel madness is gathering steam, and it’s not good news for the world’s poor and hungry. Corn prices in the US have been firming on the basis of the demand for ethanol. Corn isn’t the only grain that can be used for ethanol. The federal government’s favourite ethanol manufacturer Manildra uses a lot of wheat too. So there is potential in other grains markets, without taking into account any substitution effects caused by one grain suddenly becoming much more expensive.
This has a number of effects. One is to make biofuels even more uneconomic, thus putting pressure on governments, having mandated their use, to subsidise them even more heavily. The other is to make basic foodstuffs more expensive. And when food becomes more expensive there are consumers at the margins who eat less, or sometimes not at all.
This link to India’s The Financial Express puts the price of grain into perspective, while this link to AgWeb gives a good idea of the supply side – lower stocks forecast for the next year, meaning even more upward pressure on prices.
The biofuel mania is driven by two lobbies – woolly-headed conservationists with a tenuous grasp of energy economics, not to mention the carbon cycle; and commercially and economically canny farmers and manufacturers curing a stock surplus by lobbying for a government mandate combined with a subsidy. Neither group is taking account of the long-term.
And in the long-term, as this link demonstrates, we’re going to need radically more food to feed a world population estimated to top-out at 8.5 to 9.5 billion, one-third to one-half more than it is today.
Putting one man’s dinner into another man’s car hardly seems like a sensible or ethical way of solving any of the world’s problems.