"U.S. ethanol policy has drained the world's grain reserves, added little if any real value to the U.S. economy, and significantly raised the cost of U.S. and global food production," Tom Elam, PhD, president of FarmEcon, LLC, an ag consulting firm in Carmel, IN, writes.
The U.S. has set an ambitious mandate to make ethanol and other biofuels a part of the country’s energy use. But has that policy benefited U.S. consumers?
No, says Tom Elam, PhD, president of FarmEcon, LLC, an ag consulting firm in Carmel, IN. In written testimony submitted last week to the Senate Environment and Public Works Committee, Elam spelled out the effects of the country’s ethanol policy on the economy.
"U.S. ethanol policy has drained the world's grain reserves, added little if any real value to the U.S. economy, and significantly raised the cost of U.S. and global food production," he writes. "The current biofuels policy has made the U.S. no more energy secure, but has substantially reduced food security. Effects of U.S. ethanol policy have occurred at a time when the global grain supply and demand balance was already leading to higher grain prices, and has added to higher food costs and prices."
Elam explains that total U.S. harvested acreage of major food and feed crops since 1990 has hovered around 290 million to 292 million acres. However, major food crop harvested acreage has declined from 85.8 million acres in 1990 to only 59 million in 2010, a 31% drop.
"Essentially all the acres lost for food crop production have gone to corn and soybeans, the two crops that supply feedstock for subsidized and mandated ethanol and biodiesel," Elam says. "When biofuels advocates state that the U.S. policies have had no effect on food production, they are apparently not looking at the reality of these massive acreage shifts that have reduced U.S. food crop production potential or the economic impact of those reductions."
Elam says that, since 2007 when the Energy Independence and Security Act was signed into law, U.S. feed-grain production available to users other than ethanol plants has declined precipitously. By Sept. 1 of this year, it’s projected that only 21 million metric tons of grain and distillers grains will be available after ethanol production takes its bite out of available grain supplies.
"That 21-million-ton figure is barely enough to keep the grain supply system running, and is the basic reason that corn prices are more than $7/bu. and also extremely volatile," he says.
In fact, the U.S. has actually reached a point where any significant weather issue that would affect the 2011 U.S. grain crops will have potentially devastating implications for U.S. food prices and security. "The U.S. reserve stocks are depleted. The U.S. cannot fall back on them again as we did last year," he warns.
"In light of the realities of grain supply and demand, Congress should reevaluate the corn-based RFS schedule for 2011 through 2015," he says. "A fair and balanced approach for the overall good of the U.S. economy would give increased weight to food production costs and food security, and less weight to biofuels production. It is further suggested that if there is to be a renewable fuel standard (RFS), it should be flexible and based on market conditions."