Brown’s Numbers Don’t Add Up (8-24-06)

By Rick Tolman
NCGA CEO

Crisis—real or imagined—draws media attention. Unfortunately we live in a world of media doom and gloom. Remember Y2K?

No one is more adroit at creating would-be catastrophes than Dr. Lester Brown. He has made a very good living predicting an impending world food crisis for more than 40 years. But the face of world agriculture has been shaped more by surplus than shortage over this time period.

Despite being widely quoted, his numbers regarding the impact of biofuels on the world food market do not add up, and he shows a fatal misunderstanding of productivity and the dynamics of U.S. agriculture. One of his headline quotes is that the grain required to fill a 25-gallon SUV gas tank with ethanol could feed one person for a year.

Let’s look at the ridiculousness of this argument:

First, in filling up with E85, only 85 percent of the gas in a 25-gallon tank is ethanol, which means 21.25 gallons of ethanol are represented in a 25-gallon tank.

The industry average is 2.8 gallons of ethanol produced per bushel of corn. That calculates to approximately 7.6 bushels of corn needed to produce 21.25 gallons.

In the ethanol production process, one-third of the grain becomes a coproduct known as distillers grains, a high protein livestock feed. Let’s subtract this from the total ethanol that goes into that SUV because it is actually put back into the food system when fed to livestock. That hamburger you enjoy likely originated from beef raised on a diet that included distillers grains. Subtracting 2.5 bushels (one-third) from that total gives us a total of 5.1 bushels of corn to produce 21.25 gallons of ethanol.

The current farm gate price for a bushel of corn is slightly above $2. Five bushels times $2 equals $10. Does Brown expect to feed someone for a year on $10 worth of corn? Indeed, the sky must be falling when media and the public at large buy into this argument.

Brown also suggests, “As the price of oil climbs, so will the price of food.” I wish that he could talk with the farmers around the United States that are still getting less than $2 a bushel for their corn. Not even taking inflation into account, the prices paid to farmers today for corn are in many cases less than they were 30 years ago. Meanwhile, oil prices have more than doubled in the past three years. At the beginning of 2004, oil traded for $34 per barrel. As of August 23, 2006, the price was $72 per barrel.

Increases in food costs, which have been only marginal when inflation is considered, can be attributed to a variety of reasons, the least of which is the price of corn, or the raw material. Transportation, food marketing, packaging (think petroleum costs for petroleum-based packaging) and labor costs impact Americans’ food bills.

Certainly, corn futures prices have gone up somewhat in recent months (and come down), but that is not yet reflected in cash prices in many rural areas. Even if the farm gate price of corn were to double, it would have little impact on food prices, as the raw cost of corn has very little impact on retail pricing.

Every gallon of ethanol we produce makes us one gallon less dependent on gasoline derived from foreign oil, improves our trade balance, gives us environmental benefits, lowers our cost of fuel, builds our rural communities and reduces our government outlay on farm programs.

We have an energy crisis that is creating environmental, national security and economic crises. Ethanol is one part of a solution, as is energy conservation and other forms of renewable energy. U.S. agriculture has the capability to meet U.S. and world food supply needs and still make a significant contribution to addressing our fuel needs. These goals are compatible and not in conflict.

Do not buy into the hype and media doom-and-gloom crisis regarding ethanol and our food supply. And do not let your friends and neighbors buy into it either. It may sell some books, but the facts and our track record do not support it.