It’s Food AND Fuel

Last week SustainableBusiness.com posted the story, “Bill To Extend Ethanol Tax Credit Reignites Fuel vs. Food Debate.”

They write,

A bill introduced in the US House last week would extend ethanol tax credits for another five years, to 2015. This tax credit is set to expire on December 31, 2010. If extended, the tax credits will provide the conventional ethanol industry with $30 billion over five years.

They quoted Kate McMahon, Energy Policy Campaigner at Friends of the Earth who said,

The oil and ethanol industries need no further help from the American people. This money should be invested in more cutting-edge, clean, and renewable energy that won’t cause environmental degradation and increase food prices.

Food prices? Not so fast, here are a few facts.

World population growth is projected to reach 9 billion by 2050. Demand for food, energy, resources, and agricultural productivity is expected to increase at a faster rate, due to increased demand for dietary protein, primarily in developing countries. Accordingly the challenge is to sustainably produce food, feed, fiber, and biofuel within existing land constraints.

For those concerned about food you should know that:

  • Wheat and soy production have been increasing outside the U.S. since 1970 and that U.S. biofuel production since 2000 shows no impact on these trends.
  • U.S. yields of corn have consistently outpaced the world average. Furthermore, the overall harvested acreage for corn production under the renewable fuel standard is projected to remain stable due to continued yield gains.
  • In the U.S. agriculture has become more sustainable. Since 1980 productivity has increased, even while agricultural inputs have declined.
  • The increase in sustainable agriculture extends outside the boundaries of the U.S. Agricultural productivity gains in the last 20 years worldwide have been accomplished with fewer energy and water inputs per bushel, reduced soil loss, and mitigated climate impacts.

Add all that together and then add the fact that cropland in the U.S. is concentrated in the Midwest and Plains. Other areas have biomass potential in grassland and managed forests.

So that means that there is enough room for food AND fuel.

Industrial and Environmental Biotech in the Blogosphere

This week we start off with a United Nations report that urges caution on biofuels. Green Inc, a New York Times blog writes,

“The study concluded that whether a biofuel is climate-friendly or not depends largely on whether it is based on crops or production residues. Biofuels of the latter category were generally considered beneficial for the environment, and generating electricity locally from waste materials was found — in most cases — to be more energy efficient than converting biomass to liquid fuels.”

This paper was also written about in the blog, Futurism Now, the post called, Biofuels Will Increase Global Warming According to Study

They explain,

“That is because the land required to plant fast-growing poplar trees and tropical grasses would displace food crops, and so drive deforestation to create more farmland, a powerful source of carbon emissions.”

Not so fast, check out the Sustainable Production of Biofuels.

And biofuels continues to be the topic of the week. The biofuel review writes this week about a report from the Imperial College of London. The report has an upbeat tone about the future of biofuels and The biofuel review ends their post with a quote from Clare Wenner, Head of Renewable Transport at the Renewable Energy Association that says,

“Imperial College London has verified the results which show that these fuels can be produced in a sustainable way. With the right legislative framework, including the implementation of environmental rules under the Directive, it will be possible to limit indirect land use effects. Land will always be used for food and fuel, and the overall balance of these impacts could be positive as far as food is concerned. In fact, it seems likely that wheat-based biofuels production will not affect the amount of wheat exported by the EU as a whole.”

Then it’s more biofuels from Creamer Media’s Engineering News

According to Engineering News,

“Pretreatment and gasification technologies are on the verge of making second-generation biofuels a commercial reality, according to new analysis from Frost & Sullivan, entitled ‘Worldwide Market Analysis of Second Generation Biofeedstock.”

Engineering news interviewed Frost & Sullivan senior research analyst Phani Raj Kumar Chinthapalli,

“The use of second-generation biofuels is expected to reduce 
the emission of greenhouse gases (GHG), particularly carbon 
dioxide (CO2), from combustion engines by 80% to 85% in comparison with conventional fossil fuels. The lifecycle emissions for second-generation biofuels are in the negative range, which implies consumption of CO2 rather than emission.”

That’s it for this week, see you next week.

Data Also Disproves Food v. Fuel Claims

The Wall Street Journal’s Scott Kilman reported earlier this week on a letter sent by General Mills, the Grocery Manufacturers Association and Kraft Foods to Ag. Sec. Tom Vilsack, asking for reduction of trade tariffs on sugar. From Kilman’s article and the letter, it’s clear that grocery manufacturers are once again trying to distract public attention from their price increases by pointing a finger of blame at biofuels.

Last year, you may recall, Roll Call exposed the Grocery Manufacturers Association’s plan to use the food vs. fuel debate to cover their industry’s price increases.

Kilman writes:

Prices are up because the world is consuming more sugar than farmers are producing. One big factor: The world’s largest sugar producer, Brazil, is diverting huge amounts of its cane crop to making ethanol fuel. Likewise, the food industry has complained bitterly in recent years about the U.S. ethanol industry’s ravenous appetite for corn, which helped push up prices for that key ingredient too.”

Sugarcaneblog provides the real explanation for current, temporary sugar price increases – rain has slowed the pace of harvesting – even while Brazil’s sugar production is up 15 percent this year.

Reuters reporter Brad Dorfman provides much more thorough, clearer analysis on the claims made by the grocery manufacturers:

Food industry analysts say inflation should be contained for an industry that sharply increased prices in the past year as costs for commodities such as vegetable oil, wheat and corn surged.
“Many commodity prices have retreated, and manufacturers are trying to defend the price increases as consumers and retailers try to rein in costs in a weak economy.”

The Consumer Price Index shows that food prices have actually declined a percentage point over the first half of this year, after rapid increases in the past two years. The data also show that the increases in the past year were out of proportion to inflation in other categories.

CPI Percent increase/decrease

2002

2003

2004

2005

2006

2007

2008

2009

Food

1.5

3.6

2.7

2.3

2.1

4.9

5.9

-1.1

Energy

10.7

6.9

16.6

17.1

2.9

17.4

-21.3

14.8

Other Goods

1.9

1.1

2.2

2.2

2.6

2.4

1.8

2.3

Source: Bureau of Labor Statistics.

Neither biofuels nor energy provide a good explanation for increases in food prices.

Increases in food price inflation do not correlate well to either biofuel production or energy price data.

Increases in food price inflation do not correlate well to either biofuel production or energy price data.

Even a Congressional Budget Office study requested by Members of Congress who wanted to make a case that biofuels’ were raising the cost of government food programs could only find a 10 percent to 15 percent impact on food prices from biofuels. That study showed that nearly two-thirds of the price increases could not be explained by either biofuels or energy prices.

Of the 5.1 percent CPI increase for food between April 2007 and April 2008, energy had a larger effect than biofuels. But even together, they account for a fraction of food price inflation:

Biofuels

0.5 to 0.8

10 to 16%

Energy

1.1

22%

Other Causes

3.2 to 3.5

62 to 68%

Source: Congressional Budget Office, “The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions,” April 2009

So why is GMA resurrecting its campaign to blame biofuels for food price increases? (See also their letter to Sen. Boxer from a few weeks ago.) Likely because it was a very profitable strategy for them last year and it continues to work, at least with half the time.

Land O’Lakes

16%

Kraft Foods

21%

Sara Lee

55%

General Mills

61%

Kellogg Co.

9%

Source: 2020 Project, FoodPriceTruth.org.

New Biofuels Manifesto

University of Minnesota Professor David Tilman, Princeton University Visiting Scholar Tim Searchinger, Dartmouth Professor Lee Lynd and others involved in the debate over the environmental and social impacts of biofuels have published in Science magazine what amounts to a new manifesto on how biofuels can be done right.

The authors list five biofuel feedstocks that are the best in terms of sustainability — “lower life-cycle greenhouse-gas emissions than traditional fossil fuels and with little or no competition with food products.”

The authors conclude:

Three steps should be taken: meaningful science-based environmental safeguards should be adopted, a robust biofuels industry should be enabled, and those who have invested in first-generation biofuels should have a viable path forward.

The EPA’s proposed rule on the Renewable Fuel Standard was intended to outline a viable path forward for first-generation biofuels. The Best Case Natural Gas Dry Mill, the Biomass Dry Mill, and the Biomass Dry Mill with Combined Heat and Power scenarios outlined in the “EPA Lifecycle Analysis of Greenhouse Gas Emissions from Renewable Fuels” all produce reductions in greenhouse gases that come close to or exceed the 20 percent standard in the RFS. The EPA’s definition of the Best Case is: “Best case plants produce wet distillers grain co-product and include the following technologies: combined heat and power (CHP), fractionation, membrane separation and raw starch hydrolysis.”

The question will be whether anyone invests in these technologies or in additional biofuel production at all, given the current economic and social climate in which biofuel companies are operating. One possible factor in choosing the best biofuels ought to be how soon they can become a reality and whether they can be improved from there.

CBO Calculates Ethanol’s Impact on Food Prices

According to a newly released Congressional Budget Office report, ethanol contributed between 0.5 and 0.8 percentage points (10-15 percent) of the overall 5.1 percent increase in food prices between April 2007 and April 2008. That estimate is considerably lower than previous estimates. The report also calculated the increase in costs for federal food aid programs, which was the initial reason that Reps. Ron Kind (D-Wisc.), Rosa DeLauro (D-Conn.), and James McGovern (D-Mass.) requested it.

Despite that purpose, the Grocery Manufacturers Association, American Meat Institute, National Turkey Federation and National Council of Chain Restaurants were quick to publicize the report in their anti-ethanol Food Before Fuel campaign.

However, the report leaves a very large question open about the true causes of food price increases. The CBO notes that energy costs contributed another 1.1 percentage points (22 percent) to the 5.1 percent increase. That means that 3.2 percentage points (roughly two-thirds) are unaccounted for. And note, the 5.1 percent rise came on top of 2.5 percent and 4 percent food price increases in 2006 and 2007.

The other cited causes of increased food prices are growing global demand for meat, the depreciation of the U.S. dollar, which made U.S. corn cheaper than overseas corn, and speculation in corn futures due to expected poor harvests and overall hype about demand for corn. Is it possible that ethanol’s impact on food prices is much lower than the impact of certain groups simply raising food prices?

Setting the Record Straight

I was pleased to read AP reporter Deborah Jian Lee’s story on Jan. 12, saying that the food and fuel debate has “receded to a murmur, and even the Grocers Manufacturers Association, one of the most vocal biofuel critics, seems to be backing off a bit.” Biofuel producers will likely remember that last May the Capitol Hill newspaper Roll Call revealed that the Grocery Manufacturers Association had launched a public relations effort to blame biofuels for rising food prices. I asked the question then whether the press would set the record straight, as noted economists and BIO have tried to do throughout the year.
It was interesting to note the comments of the GMA’s Scott Faber, who apparently said ethanol production is “just one in seven sources of commodity price inflation.”

The Biofuels Update

Yesterday I was sitting around wondering what I was going to write about today, searching for inspiration, when it hit me — I’ll ask my twitter friends!  So I posted, “looking for the latest, greatest, hottest, info/news on biofuels.”

And that’s where the ideas came from for today’s post — Thanks to @EpicBear and @tomkimmerer for your suggestions, I really appreciate them.

Biofuels Digest reports that confirmation hearings,

begin next Tuesday for Energy Secretary-designate Dr. Steven Chu, and for Lisa Jackson, president-elect Obama’s nominee to head the EPA.

and that,

… speculation has commenced on potential DOE appointees to critical positions in the Department of Energy under Dr. Steven Chu. Names heard by the Digest include:

Deputy Secretary: Obama transition team members Susan F. Tierney or Jason Grumet. Assistant Secretary for Energy Efficiency and Renewable Energy: Maura O’Neill, Sen. Maria Cantwell’s (D-WA) chief of staff.

Here at BIO we were excited about the appointment of Dr. Steven Chu.  Now we’ll just have to stay tuned and see what happens next.

Next on the agenda, in case you missed it, food vs. fuel may be a non-issue, at least according to a new study published in Global Change Biology Bioenergy by researchers at the University of Illinois.  Nick Chambers of gas 2.0 writes in his post, Ethanol Made from Grasses Reduces Greenhouse Gasses,

The problem with using corn, and other annual crops such as sugarcane, is that they need to be replanted every year. This repetitive working of the soil creates a carbon deficit that can take years to build back using the best management strategies available and in the meantime you’ve released more carbon dioxide into the atmosphere than you’re trying to save by using biofuels in the first place.

On the other hand, the researchers found that perennial grasses like miscanthus, switchgrass and native prairie grasses, have a small initial carbon release associated with planting, but after that they start acting as a carbon sink very quickly.

So, in terms of dealing with climate change, if we’re going to turn to biofuels as part of our energy mix in the future, it looks like perennial grasses are the hands-down winner.

So let’s get going! According to Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section,

“There are more than 30 existing and planned cellulosic biorefineries set to begin production of advanced biofuels in the next few years. Many other projects and promising technologies are on the drawing board. These pioneer cellulosic biofuel facilities will prove that the technology works and that the industry can meet the goals established in the Renewable Fuel Standard. With oil prices set to rise again, per the projections, the need for domestically produced advanced biofuels should remain a priority for U.S. policymakers and consumers.”

And finally according to the New Energy World Network, “The biofuels industry is entering a new era according to a new report: 2008 Biofuels and the Impact on Chemicals, from SRIC.”

Bob Davenport, author of the report, said, ‘While phase II biofuels may break the food/fuel conundrum, interestingly, it may actually tie chemicals and fuels closer together at least as far as deriving these two products from biomass. The technologies that may deliver new biofuels can also be applied to make “petrochemical” molecules – as well as other molecules, some new – from biomass.

Having said that, in my mind that can mean only one thing, and that’s that renewable biofuels can create green jobs and contribute to a new energy economy.

Here’s to a great 2009 everyone!

How Much Corn Is in a Barrel of Oil?

A segment on the Discovery Channel’s show “How Stuff Works” caught my eye this week and prompted that question. The segment points out that Xanthan gum, fermented from corn syrup, is used in oil drilling. Xanthan is combined with the drilling mud used to cool drilling equipment, and it helps to clear dirt and rock from the mud as well as maintain a pressure cap on the bore hole.

The primary markets for Xanthan gum are of course food and cosmetic ingredients — check your supermarket shelves for the number of products containing it. But enough is used in oil production that a 2006 Saudi Aramco white paper explored establishment of a Xanthan gum production plant in Saudi Arabia to meet oil drilling needs. The white paper projects the market for Xanthan gum for 2007 and 2008 among the Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), using Saudi Aramco’s exploration and production models. For 2007, the projected need was nearly 15 million pounds, and for 2008, nearly 12.5 million pounds.

Arguments about the diversion of food and land for biofuel fail to consider exactly how many non-food products contain corn.

High Food Prices Hurt Consumers and Biofuels Companies

Yesterday, the New York Times wrote:

“A United Nations food agency called on Tuesday for a review of biofuel subsidies and policies, noting that they had contributed significantly to rising food prices and the hunger in poor countries.

With policies and subsidies to encourage biofuel production in place in much of the developed world, farmers often find it more profitable to plants crops for fuel than for food, a shift that has helped lead to global food shortages.”

Even though corn and other crop prices increased from 2006 to 2007, there is no shortage of food. According to the USDA National Agricultural Statistics Service U.S. farmers planted 92.9 million acres of corn in 2007 (NASS: Acreage), with average yield expected to be 153 bushels per acre (NASS: Crop Production). USDA says 3.4 billion bushels, roughly 26 percent of the expected harvest, will be converted to approximately 9.3 billion gallons of ethanol, leaving more than 9 billion bushels for food, feed and export markets, which would easily meet or exceed 2006 demand from these markets.  Translation, plenty of food.

Food prices increased 4.1 percent in the United States from June 2006 to June 2007 for a number of reasons:  increased corn prices, increased costs of oil, worldwide weather-related disruptions of food (droughts and freezes), and contamination scares.

Now fast-forward to October, 2008.  Barron’s wrote on October 2, 2008,

“Corn prices, for example, fell 6% in Thursday’s trading, dropping to $4.55 a bushel – the lowest price corn has commanded since December. “

High food prices aren’t just bad for consumers, they’re bad for the biofuels industry.

“There were ominous signs for the [biofuels] industry even before the Wall Street meltdown,” writes the Associated Press.

“By 2007, corn and soybean prices charged upward, cutting into the profit margin for biofuels and leaving some plants without enough cash to operate.

Plant operators in Lilbourn said doubling soybean prices wiped out cash reserves just as the first batch of biofuel was produced.”

But now,

“…with commodity prices dropping, construction for some stalled biofuels plants has restarted.”

The take-home message, high food prices result from a complicated set of factors and affect not only consumers but the biofuels industry as well.

A Tale of Two Studies

Don Mitchell of the World Bank’s Development Prospects Group has released an official version of his analysis of biofuels’ impact on the rise in global food prices. An early version of the study was leaked to the Guardian in London on July 4.

Mitchell attributes 70 to 75 percent of the increase in food commodities prices to “biofuels and the related consequences of low grain stocks, large land use shifts, speculative activity and export bans.” In other words, Mitchell assumes that U.S. and EU support for biofuel production is the direct cause of other phenomena that have contributed to the rise in food commodity prices. Mitchell attributes the remaining 25 to 30 percent of food price increases to the rising price of oil and the weakening of the U.S. dollar.

And how did biofuels contribute to low grain stocks? According to Mitchell, it is because biofuel crops were grown “on land that could have grown wheat.” Mitchell notes that worldwide wheat acreage declined by only 1 percent and wheat stocks actually grew. Nevertheless, in his opinion, more wheat should have been grown.

Mitchell’s assumptions contrast with the conclusions of other studies, including a recent one by Purdue University economists released by the Farm Foundation. That study follows others in concluding that the rising price of oil is the largest contributor to rising food costs, in part because it is a stronger driver of demand for biofuels than government policy has been. Researchers at Texas A&M University came to this same conclusion, as has been discussed on this blog.

Despite the fact that Mitchell admittedly “does not consider how supply would respond to high commodity prices and moderate price increases over time,” he nevertheless concludes that “biofuels policies which subsidize production need to be reconsidered in light of their impact on food prices.” The Purdue study concludes with a much more cautious note: “The challenge facing policy makers is to find policy options that deal with the short-term effects created by rising food prices without creating a new set of long-term problems.”