Ethanol proponents . . . → Read More: Why Ethanol Alone Won’t Solve U.S. Energy Problems]]> Although it’s debatable whether transforming a percentage of the U.S. corn crop into ethanol is responsible for recent hikes in global food prices, even the most enthusiastic industry supporter must admit that, in the long run, domestically-produced ethanol is not a viable substitute for 100% of the crude oil currently being imported.

Ethanol proponents point to the “Brazilian miracle” with the inference that, if transportation fuel independence can be achieved there, it can also happen in the United States. However, the situations of the two nations are totally different and cannot be used as any basis for comparison.

The Brazilian Solution

Brazil achieved transportation fuel independence in 2006 through domestic production of ethanol and crude oil. Although that latter is often overlooked by advocates, aggressive deepwater exploration by Petrobras and some massive offshore oil discoveries in the first few years of this century have contributed at least as much as ethanol production toward achieving this goal. Among South American nations, only Venezuela has larger crude oil reserves than Brazil, which is now one of the fastest growing oil-producing nations in the world.

For light domestic use, Brazilian refiners cut gasoline with at least 20–25% ethanol made from sugarcane. The Flex-Fuel technology operating on 87% of local vehicles allows them to burn any mixture from pure gasoline to pure alcohol, thus freeing drivers to purchase the most economical fuel available at any given time. Because ethanol only offers 70% of the efficiency and therefore only 70% of the miles per gallon of gasoline, drivers have learned that, unless it’s at least 30% cheaper than petrol, ethanol is actually more expensive in operation. On long roads with few filling stations, gasoline remains the fuel of choice.

In Brazil there are around 85 cars per 1,000 people, restricting the demand for gasoline, as opposed to fuel oil for industrial purposes and electrical generation, or diesel fuel, which cannot be mixed with ethanol as gasoline can. For this reason, despite producing 327,000 barrels of ethanol per day in 2007, Brazil also consumed 2,307,000 barrels of oil per day. Despite the substitution of ethanol for 50% of Brazil’s light transportation needs, the greatest part of their economy is run on domestically produced crude oil.

The U.S. Situation

The United States, on the other hand, possesses approximately 765 cars per 1,000 people, leading to a much higher demand for gasoline. According to the U.S. Energy Information Administration, during the week ending September 5, those cars required 9,090,000 barrels of oil per day, down from 9,393,000 during the same week in 2007. However, the U.S. mainly uses coal and natural gas for electrical generation and industrial purposes, leading to a lower reliance upon fuel oil, which is why the U.S. possesses nine times as many cars as Brazil but only uses four times the amount of crude oil.

U.S. ethanol is fermented from corn, which is much less productive than sugarcane for the purpose, requiring an additional step in the process and providing one-seventh of the energy. While sugarcane does grow in the most southern and tropical of the states (Hawaii, Florida, Louisiana and Texas), it’s not a viable crop elsewhere, leaving the U.S. mostly dependent upon corn for ethanol.

The Renewable Fuels Association says that one bushel of corn makes 2.8 gallons of ethanol, while Purdue University informs us that the 2008 U.S. corn crop will average 155 bushels per acre. Based upon these production figures, there’s simply not enough cropland even in the U.S. heartland to produce enough ethanol to replace all the transportation fuel needed on a daily basis—not if we want to eat, too.

Although a nascent technology under development is capable of producing ethanol from any form of cellulosic matter from weeds to woodchips, even that won’t be sufficient to drive much more than 30% of America’s vehicles, according to a recent report jointly authored by the U.S. Departments of Agriculture and Energy.

All-Inclusive Solution

Replacing imported oil for transportation purposes in the U.S. is not a one-step process, and more than one substitute fuel will be required. Although ethanol is a piece of that puzzle, it cannot be the entire solution.

Perhaps that’s the lesson to be learned from Brazil—not necessarily to run cars on ethanol but to be flexible in the choice of fuels. Beyond Flex-Fuel vehicles arises the possibility of hydrogen, electrical and natural gas-powered cars. Perhaps our final choice should be all of the above.

There have been numerous attempts to link worldwide food inflation with U.S. attempts to lower oil imports through increasing production of ethanol. Most of these . . . → Read More: U.S. Ethanol Production and World Hunger]]> Is the United States starving the world to save its citizens from high energy costs? Is processing corn into ethanol lowering global food supplies and leaving people hungry elsewhere?

There have been numerous attempts to link worldwide food inflation with U.S. attempts to lower oil imports through increasing production of ethanol. Most of these discussions are simple supply-and-demand models: by siphoning corn into ethanol production, the amount available to feed the world’s hungry people is reduced. This pushes up demand for other grains as alternative food sources, raising prices across the board and leaving poorer nations to do without.

The theory became widespread as grain prices on the Chicago Board of Trade spiraled during the first half of the year and wasn’t helped by droughts in Australia and South Africa. When Russia slapped a 40% export tariff on their wheat crop, when Argentina refused to share their wheat and Vietnam their rice, when food inflation protests exploded in Mexico, Italy, Pakistan, China and Indonesia, many fingers pointed to ethanol as the prime culprit.

There’s just one problem with the theory: it’s not supported by the facts.

Ethanol’s Place in the Food Chain

Ethanol is mainly produced from animal feed corn, as in “Iowa corn-fed beef.” Because this crop isn’t intended for human consumption in any country, directly linking ethanol to global food supplies is nonsense.

Ethanol production does not use the entire corn kernel, only the starchy part; the remainder is used for animal feed as originally intended. Industry advocates claim these by-products, termed distiller’s dried grains with solubles (DDGS), offer greater nutritional availability because of the processing, as breaking the kernel’s tough outer shell makes the grain’s innards more accessible to the animal’s digestive tract. (Feed corn is often cracked prior to feeding for this very reason, even if no ethanol is produced.)

Because removing all of that starch from the corn leaves a higher protein feed that’s loaded with vitamins, DDGS is in growing demand as a feedstock. It’s now being exported to the Eurozone, Canada and Mexico, while an Australian feedmill has requested a sample shipment for trial in the local dairies.

Ethanol in context

However, the real problem with the food-or-fuel theory is that it looks at food prices outside of the context of the global economy.

As is the case for many other commodities, several factors came together in 2008 to drive up prices. These include the usual suspects of financial market turmoil due to the subprime mortgage fiasco, a commodities price bubble caused by investors looking for safer places to park their funds than global equities markets and an historically weak U.S. dollar. Because most commodities are priced in dollars, when its value falls on the world market, prices must rise in an inverse ratio to compensate. Metals prices also shot through the roof, but ethanol production had nothing to do with that, either.

The unfortunate fact is that energy costs are more directly related to the price of processed foods than are the costs of raw materials. Value is added by processing, packaging, storing, shipping and refrigerating foods, all of which require energy, which also skyrocketed in price this year. No matter how high the cost of a bushel of corn rises, it remains less than 5% of the cost of a box of corn flakes. Even shipping unprocessed grains to hungry people overseas has become more expensive, with ocean freight charges just beginning to recede from record levels, too.

The U.S. heartland remains the breadbasket for the world. The 2008 corn crop is currently estimated at 12.288 billion bushels from 87 million acres, the second largest on record despite the spring flooding in the Midwest and close behind 2007’s record-breaking crop of 13.1 billion bushels. Around 20% of that will be exported, accounting for almost 70% of all world corn exports—without export tariffs.

Meanwhile, the growing ethanol industry contributed $47.6 billion to the U.S. economy in 2007, influencing or creating 238,541 jobs in various industrial sectors including 46,000 manufacturing jobs—jobs that must remain near the corn-producing states and therefore cannot be outsourced to India or China—and generating $4.6 billion in tax revenue for the federal government and another $3.6 billion for various local and state governments. The 6.5 billion gallons of ethanol produced meant that 228.2 million barrels of oil were not imported.

Perhaps the U.S. really can have its cake and let the world eat, too.