Ethanol and Food Security – Getting Past The Anti-Ethanol Rants

December 19, 2012

Last week the National Journal headlined, “BIG OIL TAKES GLOVES OFF IN ETHANOL FIGHT.”

The argument is this: The cost of producing ethanol from corn is food insecurity.

Playing into their argument this year is the terrible drought that was and is smothering many parts of the U.S.—including the heart of our corn producing lands. It is in fact this drought, which has persisted in many regions for more than two years, that has spurred corn prices to current heights.

But before anyone buys the argument that ethanol is to blame for these higher prices, they should consider the following key facts:

Fact 1—If it weren’t for ethanol, we would not have as many acres planted to corn.

The development of the ethanol industry has provided economic incentives for corn growers—market incentives necessary to spur investment and growth.

This year, U.S. farmers planted 97 million acres in corn, up24 percent from the roughly 78 million they were planting a decade ago. Importantly, the acreage is also more spread out. States like Arkansas and Mississippi in the south, and the Dakotas in the north, have increased acreage significantly—providing real help for this year’s crop when the drought set in on the traditional corn belt states of Illinois, Indiana, Ohio, Iowa and Nebraska.

Indeed, if we had this year’s one in one-hundred year drought on the same 78 million acres more concentrated in the heart of the corn belt as we had 10 years ago, the price spike we have seen would have been far worse.

Fact 2—If it weren’t for ethanol, we would not be able to make the yields we expect to make on corn.

Before the historic drought of 2012 set in, USDA was projecting yields per acre on corn would be 166 bushels. A decade ago, we could have only expected a yield of 136 bushels (18 percent lower).

Technology has absolutely revolutionized agriculture, and, again, the investment in technology would not have been made had there not been economic incentive.

Not only have the seeds improved thanks to the significant investments of companies like DuPont, Bayer and Monsanto; but farmers have made tremendous investments in new precision technologies to farm smarter, as well as traditional risk mitigating equipment like irrigation or bigger planters and combines to get the crops in and out faster. While drought zapped the return on this investment this year, it also highlights how much worse it could have been. The last comparable weather event in the Midwest was the 1988 drought. That year, we averaged 84.6 bushels to the acre nationwide. This year, although the drought is more severe, our national average corn production should come in at about 123, 26 percent below what we had expected, but 44 percent above the last comparable event.

Bottom line—If it weren’t for ethanol, we would not have the productive capacity we currently enjoy for corn and would therefore be more, not less, susceptible to a potential food shortage. This year was tough for farmers and the users of corn alike who are dealing with a short U.S. crop of roughly 10.9 billion bushels rather than the 15.1 billion bushels many expected. But the U.S. is not alone, and just as our farmers have responded to the market call, so have farmers in other nations.

Therefore, despite the terrible drought in the U.S., the world will enjoy its second largest corn crop ever at 33.1 billion bushels. Our capacity to achieve this end should not be taken for granted, just as we should not overlook the fact that the economic opportunities created by ethanol have played a significant role in building out this capacity.

So are we actually arguing that the development of ethanol is a piece of the solution rather than a part of the problem when it comes to global food security? Yes. With a world of 7 billion inhabitants growing to 9 billion by 2050, and with a growing middle class and consumption outpacing just population growth, we have needed and continue to need incentives to grow our productive capacity. Ethanol has filled this need, and helped us build that capacity.

Given the renewed and big-bucks effort, we should all expect to see a lot of flack about the problems of ethanol. But readers should take a step back, and understand the significance of what ethanol has done in building the capacity of U.S. farmers to feed this hungry world.