You Can't Say I Didn't Warn You

* Why biofuels won’t help climate change Prices for wheat, maize (corn) and soya beans are already sky-high, as a combination of increasing subsidies for US farmers to grow corn for bio-ethanol combines with the effects of a disastrous drought in Australia, one of the world's biggest wheat growers. EU directive will make matters worse "The competition for grain between the world's 800 million motorists, who want to maintain their mobility, and its two billion poorest people, who are simply trying to survive, is emerging as an epic issue," according to the US-based Earth Policy Institute (EPI). The amount of US maize being turned into bio-ethanol for vehicles has tripled in five years to 50 million tonnes in 2006, according to the EPI. This is more than 15% of the total American crop. The US provides 70% of the world's exportable maize, which is the most important global grain. Not just a worry for cornflake eaters Already a 60% rise in the price of tortillas, which are made of maize flour, has sparked riots in Mexico. The government this week set an agreement with tortilla manufacturers to limit prices. In much of Africa, where maize is a staple, drought and high import prices are causing great hardship. In Zimbabwe, where the economy is on the point of collapse, there have been food riots over the price of corn meal. Concern is reaching into the boardroom too. Giant US food processor Tyson in January warned that food prices have been hard hit by ethanol production. "We fully support efforts towards renewable energy," said Tyson president Dick Bond. "However, as the food-fuel debate unfolds, we must carefully consider the negative and unintended consequences of over-using grains." The corn economy Maize prices have doubled since George Bush in January 2006 stated his aim of cutting US dependency on foreign oil. Even if you don't eat cornflakes or sweetcorn, that price rise matters and has widespread consequences. Indeed the effect of that policy on food prices offers a textbook insight into the functioning of economics: * Corn syrup made from maize is usually the cheapest natural sweetener, and is added to soft drinks, colas, ice cream, mayonnaise, ketchup, tinned products, ready meals and so on. * More expensive sweeteners add to the cost of the food, one of the main reasons blamed for the jump in US wholesale price inflation to 3.2% for the year to March. * Maize is used as an animal feed for chickens, pigs and cattle. If the price of animal feeds goes up, so do the price of eggs, chicken, pork, bacon, beef and other meats. Maize accounts for half the cost of raising a pig in the United States. * Farmers switching to maize because of the increased prices available grow less of other crops. A typical American mid-western farmer can make $150 an acre more from corn than soyabeans, so the soyabean acreage has dropped. * Thus, while US corn acreage has grown 15% this year, this has been taken away from the acreage of wheat, soyabeans, rape (known as canola in the US) and other crops, whose prices have consequently risen too. * Maize requires more nitrogen-based fertilizers than most competing crops. Increased grain acreage has raised the price of these fertilizers to record highs of $365 per tonne, compared with $100 in 2000. * These fertilisers are made with urea, a derivative of natural gas, one of the main reasons why agricultural inputs contribute to a sixth of all carbon emissions. With few US petrochemical plants able to handle urea, the boost to corn production is causing an increase in imports of fertilizer. Ironically, these are being sourced from Middle East oil producers at a cost of $1.6 billion a year. Only the beginning of price pressure This is only the start of the pressure on food crops. The International Energy Agency says that demand for crops for biofuels will soar from 41.5 million tonnes of oil equivalent in 2010 to 92.4 million by 2030. With government subsidies it may climb faster to 146.7 million tonnes by 2030, the IEA says. So far the US has been in the driving seat of the move to biofuels, yet in Europe we have just as ambitious targets. In 2012 an EU directive comes into force mandating 5.75% of all European fossil fuel in vehicles to be replaced by biofuels. This will increase to 10% by 2020, compared with less than 1.5% at the moment. Hans-Willem Windhorst, of the University of Vechta in Germany, has calculated that for the EU to meet its 2020 target for biofuels, a quarter of all European arable land will have to be turned over to producing biofuels. Start of the effects in Britain In Britain we have only so far seen the backwash of the climb in international grain prices. Though wheat prices are high, at £95 per tonne compared with £69.50 a year ago, the Australian drought is taking as much blame for that as corn-substitution. Local bio-ethanol production, most of which is due to use wheat, hasn't really got going in volume, though there is significant production of bio-diesel using rapeseed oil amongst others. "Biofuel plants here would have their effect on the exportable grain surplus first," said Richard Shirley, business editor at Farmers Weekly. http://money.uk.msn.com/investing/articles/nicklouth/article.aspx?cp-documentid=4791536 [Proofreader's note: this article was edited for spelling and typos on May 11, 2007]

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