The Truth About Ethanol and Food Prices

Bliss Baker, Vice President GreenField Ethanol

Countries around the world are seeking alternatives to the economic and environmental problems caused by oil dependency. One solution supported by many governments is to replace part of the gasoline pool with clean-burning biofuels such as ethanol. But recent reports have suggested that increased corn production to make ethanol drives up food prices and could lead to hunger in poor countries. It is time to set the record straight.

Biofuels do not lead to famine. As Nobel Prize winner Dr. Amartya Sen pointed out ten years ago, worldwide hunger does not result from insufficient food production but rather from low income and unemployment, which limit the access to food. Lack of infrastructure, weak institutions and misguided public policies also contribute to the unequal distribution of food around the world.

A 2005 report presented to the United Nations’ Committee on Agriculture noted that agriculture and forestry products such as sugarcane and maize could become leading sources of energy, a key element in eradicating extreme poverty and hunger and ensuring environmental sustainability. The 2005 report also anticipated a significant switch from a fossil fuel to a bioenergybased economy that would benefit not only the rural poor but also the whole planet, since biofuels such as ethanol can help fight climate change.

Blame petroleum, not agricultural prices. Food prices have increased far less than petroleum prices. Over the last three years, when biofuels gained momentum, agricultural prices have gone up by 7% while oil prices jumped by more than 70%. In fact, the sharp increase in oil prices is largely responsible for the increase in food prices. Moreover, higher oil prices are the result of rising demand in fast growing emerging countries such as China and India, adverse climatic conditions in some regions, and speculation on international markets. Higher agricultural prices provide additional income to farmers in developed and developing countries negatively affected by low international prices during many years.

Biofuels drive social and economic improvements. Critics fail to mention the social improvements, the job opportunities and the income growth that are associated with the growing biofuels industry. Many government leaders are exploring initiatives in the area of production of biofuels around the world — they all see an opportunity to increase their countries wealth by diversifying away from costly foreign petroleum dependency.

In Canada and abroad, ethanol production greatly benefits rural economies. Production plants are typically built in rural areas where corn is grown. An average plant employs about 50 people with well-paying, high-skilled jobs and provides hundreds of spinoff jobs through local providers of goods and services. More than 70 per cent of the revenue from an ethanol plant is spent within a 150-kilometre radius of its
site. This is precisely why more than 35 rural communities across Canada are currently looking at ethanol production as a way to rejuvenate their economies. One only has to look at booming Iowa to see what ethanol production has done for its rural economy.

Ethanol production in Canada is expected to rise from 650 million litres in 2007, to more than two billion by 2010. This newly created production will lead to more than 9,000 new jobs in rural Canada and provide a market for more than 200 million bushels of grains and oilseeds annually. With this increased demand, perhaps Canadian farmers can get more for their grain and finally make a good living growing the food we eat.

Biofuels can help ameliorate the climate crisis today. As this year’s Nobel Peace Prize Laureates remind us, global warming is a pressing challenge that needs to be addressed without any further delay. Biofuels such as ethanol, provide one of the most sensible and attractive solutions to date, particularly considering biofuels’ contribution to the reduction of CO2 emissions, which has been repeatedly confirmed by several respected international studies, including the International Energy Agency. Increased ethanol use is one of the most practical and immediate alternatives to reduce greenhouse gas emissions and combat the climate crisis.

Ethanol and Ontario’s farmers will play a big role in helping Canadians reduce harmful greenhouse gas emissions as the biofuel industry grows. According to GHGenius, a climate-change model used by the federal government, the greenhouse-gas reductions from corn ethanol are more than 55 per cent. By growing corn for ethanol, Ontario farmers are also helping to reduce smog, acid rain and air pollution.

As you see, a strong biofuels industry in Canada and worldwide will have very little impact on food prices. Ethanol is good news for Canadian farmers and rural communities, good news for our environment and air quality, good news for the consumers and motorists and good news
for the Canadian economy.