http://www.enn.com/net.html?id=1716

Exploding U.S. Grain Demand For Automotive Fuel Threatens World Food Security And Political Stability

November 06, 2006 â€" By Earth Policy Institute

WASHINGTON, DC â€" "Now that the year's grain harvest is safely in the bin, it is time to take stock and look ahead," writes Lester Brown, President of the Earth Policy Institute.

This year's harvest of 1,967 million tons is falling short of the estimated consumption by 73 million tons. This shortfall of nearly 4 percent is one of the largest on record.

In six of the last seven years world grain production has fallen short of use, drawing world grain carryover stocks down to 57 days of consumption, the lowest level in 34 years. The last time they were this low wheat and rice prices doubled.

The growth in world grain consumption since 2000 averaged roughly 31 million tons per year. Of this, close to 24 million tons were consumed as food or feed. The annual growth in grain used to produce ethanol for cars in the United States alone averaged nearly 7 million tons per year, climbing to a high of 14 million tons in 2006.

The amount of grain used to produce fuel is exploding. Investment in crop-based fuel production, once dependent on government subsidies, is now driven by the price of oil. With the current price of ethanol double its cost of production, the conversion of agricultural commodities into automobile fuel has become hugely profitable, leading to a jump in groundbreakings for new ethanol distilleries. Between October 25, 2005, and October 24, 2006, construction started on an astounding 54 new ethanol distilleries in the United States. With a typical construction period of 14 months, virtually all of them will be producing by the end of 2007. Together these plants, with 4 billion gallons of annual production capacity, will consume 39 million tons of grain per year, nearly all of it corn. (See data.)

Wheat and corn prices have climbed by a third or more over the past several months. Corn and wheat futures are both trading at 10-year highs. With corn stocks at the lowest level on record and demand soaring, corn prices appear headed for historic highs. Wheat and rice prices will likely follow corn prices upward.

Corn importers like Japan, Egypt, and Mexico are worried that a likely reduction in U.S. corn exports, which are 70 percent of the world total, will disrupt their livestock and poultry industries. In some importing countries, corn is the staple food. In the United States, most corn is consumed indirectly. The milk, eggs, cheese, chicken, ham, beef, ice cream, and yogurt in the typical refrigerator are all produced with corn. In effect, the refrigerator is filled with corn.

And the price of every item is affected by the price of corn.

This clash between motorists and people over the food supply is occurring when 854 million of the world's people are chronically hungry and malnourished. The U.N. goal of reducing by half the proportion of people suffering from hunger by 2015 is now failing as the number who are hungry edges upward, and it could collapse

completely in the face of the food-for-cars onslaught.

The attempt to solve one problem - growing U.S. dependence on imported oil - is creating another far more serious problem. Fortunately this can be avoided. The 3 percent of U.S. automotive fuel supplies now coming from ethanol could be achieved, several times over and at a fraction of the cost, by raising automobile fuel-efficiency standards by 20 percent.

On the food-versus-fuel issue, the world desperately needs leadership. As the world's leading grain producer and exporter, and the largest producer of ethanol, the United States is in the driver's seat.

Additional information is available at www.earthpolicy.org/Updates/2006/Update60.htm.

Contact Info:

Lester Brown

Earth Policy Institute

Tel : 202-496-9290 x 11

E-mail : lesterbrown@earthpolicy.org

- Ross Mayhew.

posted to Yahoo Group ClimateConcern