Revisiting the Food vs Fuel Myth

  • Thursday, 21 April 2016 11:43

Sometimes we take things for granted. 

For example, we think it's ludicrous that anyone would still claim ethanol raises food prices (it's 2016!). But years of misinformation from the oil and food industries have had an unfortunate consequence and there are still people who think all the corn grown in the United States is used for ethanol.

So let's set the record straight (again). 

In 2014/15, total supply of corn was 15.38 billion bushels of which 5.24 billion bushels was used for ethanol. Now, one bushel of corn produces 2.8 gallons of ethanol as well as 18 pounds of dried distillers grains (DDGs), which is a high-protein feed for livestock. Other co-products of ethanol production include corn oil and CO2 (which is used to carbonate beverages).

Even if no corn oil or CO2 were to be produced, only 68 percent of a bushel of corn us used to produce ethanol. As such, 2014 /15, the amount used to produce ethanol was 3.56 billion bushels or 23 percent of the total supply of corn in the United States. 

Based on the above, it's pretty clear that a small amount of the corn supply is used for ethanol production. As such, it's not surprising at all that despite record ethanol production last year, corn prices remained prices similar to 2014.

Moreover, the USDA estimates that one metric ton of DDGs could effectively replace 1.22 metric tons of animal feed comprising of corn and soybean meal.

According to a study by ABF Economics, Minnesota's ethanol producers delivered 3.6 million tons of DDGs in 2015, which was sufficient to meet the feed requirements of the entire inventory of cattle and calves in Minnesota. 

Last but not least, a report by the Global Renewable Fuels Alliance in 2015, citing data from the UN FAO, found that world food prices had dropped in 2015 in tandem with the drop in gasoline prices (strange how no one wanted to blame ethanol for lower food prices). 

Indeed, the USDA says that for every dollar spent on food, only 17.4 percent goes to the farm. The rest pays for marketing and transportation.

Farm Dollar Croped