Buy Feed Corn: They're about to stop making it…’

[Guest guest]

‘Buy Feed Corn:

They're about to stop making it…’

http://www4.dr-rath-foundation.org/THE_FOUNDATION/thebigpicture_biofuels.htm

© F. William Engdahl* July 21 2007

 

That bowl of Kellogg's Cornflakes on the breakfast table, or the portion of

pasta or corn tortillas, cheese or meat on the table is going to rise in price

over the coming months as sure as the sun rises in the East. Welcome ladies

and gentlemen to the new world food price shock, conveniently timed to accompany

our current world oil price shock.

 

Curiously it's ominously similar in many respects to the early 1970's when

prices for oil and food both exploded by several hundred percent in a matter of

months. That mid-1970's price explosion led President Nixon to ask his old

pal, Arthur Burns, then Chairman of the Fed, to find a way to alter the CPI

inflation data to take attention away from the rising prices. The result then

was

the now-commonplace publication of the absurd " core inflation " CPI numbers –

sans oil and food. Stephen Roche was the young Fed economist who was assigned

the statistical manipulation job by Burns.

 

The late American satirist, Mark Twain once quipped, " Buy land: They've

stopped making it… " Today we can say almost the same about corn or all grains

worldwide. The world is in the early months of the greatest sustained rise in

grain

prices, for all major grains including maize, wheat, rice that we have seen

in three decades. Those three crops constitute almost 90% of all grains

cultivated in the world.

 

Washington's calculated, absurd plan

 

What's driving this extraordinary change? Here things get pretty interesting.

The Bush Administration is making a major public relations push to convince

the world it has turned into a " better steward of the environment. " The problem

is that many have fallen for the hype.

 

The center of his program, announced in his January State of the Union

Address is called ‘20 in 10’, cutting US gasoline use 20% by 2010. The

official

reason is to " reduce dependency on imported oil, " as well as cutting unwanted

" greenhouse gas " emissions. That isn't the case, but it makes good PR. Repeat it

often enough and maybe most people will believe it. Maybe they won't realize

their taxpayer subsidies to grow ethanol corn instead of feed corn are also

driving the price of their daily bread through the roof.

 

The heart of the plan is a huge, taxpayer subsidized expansion of use of

bio-ethanol for transport fuel. The President's plan requires production of 35

billion gallons (about 133 billion liters) of ethanol a year by 2017. Congress

already mandated with the Energy Policy Act of 2005 that corn ethanol for fuel

must rise from 4 billion gallons in 2006 to 7.5 billion in 2012. To make

certain it will happen, farmers and big agribusiness giants like ADM or David

Rockefeller get generous taxpayer subsidies to grow corn for fuel instead of

food.

Currently ethanol producers get a subsidy in the US of 51 cents per gallon

ethanol paid to the blender, usually an oil company that blends it with gasoline

for sale.

 

As a result of the beautiful US Government subsidies to produce bio-ethanol

fuels, and the new legislative mandate, the US refinery industry is investing

big time in building new special ethanol distilleries, similar to oil

refineries, except they produce ethanol fuel. The number currently under

construction

exceeds the total number of oil refineries built in the US over the past 25

years. When finished in the next 2-3 years the demand for corn and other grain

to

make ethanol for car fuel will double from present levels.

 

Not just USA bio-ethanol. In March Bush met with Brazil's President to sign a

bilateral " Ethanol Pact " to cooperate in R & D of " next generation " bio-fuel

technologies like cellulosic ethanol from wood, and joint cooperation in

" stimulating " expansion of bio-fuels use in developing countries, especially in

Central America, and creating a " bio-fuels OPEC-like " cartel market with rules

that

allows formation of a Western Hemisphere ethanol market.

 

In short, the use of farmland worldwide for bio-ethanol and other bio-fuels –

burning the food product rather than using it for human or animal food – is

being treated in Washington, Brazil and other major centers, including the EU,

as a major new growth industry.

 

Phony green arguments

 

Bio-fuel – gasoline or fuel produced from refining food products – is being

hyped as a solution to the controversial Global Warming problem. Leaving aside

the faked science and the political interests behind the sudden hype about

dangers of global warming, bio-fuels offer no net positive benefits over oil

even under best conditions. Its advocates claim that present first generation

bio-fuels " save up to 60% of carbon emission. " As well, amid rising oil prices

at

$75 per barrel for Brent marker grades, governments such as Brazil's are

frantic to substitute homegrown bio-fuels for imported gasoline. In Brazil today

70% of all cars have " flexi-fuel " engines able to switch from conventional

gasoline to 100% bio-fuel or any mix. Bio-fuel production has become one of

Brazil's major export industries as well.

 

The green claims for bio-fuel as a friendly and better fuel than gasoline are

at best dubious, if not outright fraudulent. Depending on who runs the tests,

ethanol has little if any effect on exhaust-pipe emissions in current car

models. It has significant emission, however, of some toxins including

formaldehyde and acetaldehyde, a suspected neurotoxin which has been banned as

carcinogenic in California.

 

Ethanol is not some benign substance as we are led to think from the industry

propaganda. It is highly corrosive to pipelines as well as to seals and fuel

systems of existing car or other gasoline engines. It requires special new gas

pumps. All that conversion costs money.

 

But the killer-diller about ethanol is that it holds at least 30% less energy

per gallon than normal gasoline, translating into a loss in fuel economy per

gallon of at least 25% over gasoline for an Ethanol E-85% blend. No advocate

of the ethanol boondoggle addresses the huge social cost which is beginning to

hit the dining room tables across the US, Europe and the rest of the world.

Food prices are exploding as corn, soybeans and all cereal grain prices are

going through the roof because of the astronomical – Congress-driven –

demand for

corn to burn for bio-fuel.

 

This year the Massachusetts Institute of Technology issued a report concludin

g that using corn-based ethanol instead of gasoline will have no impact on

greenhouse gas emissions, and would even expand fossil fuel use due to increased

demand for fertilizer and irrigation to expand acreage of ethanol crops. And

according to MIT " natural gas consumption is 66% of total corn ethanol

production energy, " meaning huge new strains on natural gas supply, pushing

prices

there higher.

 

The idea that the world can " grow " out of oil dependency with bio-fuels is

the PR hype being used to sell what is shaping up to be the mist dangerous

threat to the planet’s food supply since creation of patented genetically

manipulated corn and crops.

 

US farms become bio-fuel factories

 

The main reason US and world grain prices are soaring in the past two years

and now pre-programmed to continue rising at a major pace, is the conversion of

US farmland to become de facto bio-fuel factories. In 2006 US farmland

devoted to bio-fuel crops increased by 48%. None of that land was replaced for

food

crop cultivation. The tax subsidies make it far too profitable to produce

ethanol fuel.

 

Since 2001 the amount of maize used to produce bio-ethanol in the USA has

risen 300%, trend increasing going forward. In fact, in 2006 US maize or corn

crops for bio-fuel equaled the tonnage of corn used for export. In 2007 it is

estimated it will exceed the corn for export by a hefty amount. The US is the

world’s leading corn exporter, most going for animal feed to EU and other

countries. The traditional USDA statistics on acreage planted to corn is no

longer

a useful metric of food prices as all marginal acreage is going for bio-fuel

growing. The amount available for animal and human feed is actually declining.

 

Brazil and China are similarly switching from food to bio-fuels with large

swatches of land.

 

A result of the bio-fuel revolution in agriculture is that world carryover or

reserve stocks of grains have been plunging for six of the past seven years.

Carryover reserve stocks of all grains fell at the end of 2006 to 57 days of

consumption, the lowest level since 1972. Little wonder that world grain prices

rose 100% over the past 12 months. This is just the start.

 

That decline in grain reserves, the measure of food security in event of

drought or harvest failure – an increasingly common event in recent years –

is

pre-programmed to continue going as far ahead as the eye can see. Assuming

modest world population increase annually of some 70 million people over the

coming

decade, especially in the Indian subcontinent and Africa, the stagnation or

even decline in the tonnages of feed corn or other feed grains including rice

that is harvested annually as growing amounts of bio-ethanol and other

bio-fuels displaces food grain, in fact means we are just getting started on the

greatest transformation of global agriculture since the introduction of the

agribusiness revolution with fertilizers and mechanized farming after World War

II.

The difference is that this revolution is at the expense of food production.

That preprograms exploding global grain prices, increased poverty and

malnutrition. And the effect on gasoline import demand will be minimal.

 

Prof. M.A. Altieri of Berkeley University estimates that dedicating all USA

corn and soybean production acreage to bio-fuels would only meet 12% of

gasoline and 6% of diesel needs. He notes that though one-fifth of last year's

corn

harvest went to bio-ethanol, it met a mere 3% of energy needs. But the farmland

is converting at a record pace. In 2006 more than 50% of Iowa and South

Dakota corn went to ethanol refineries. Farmers across the Midwest, desperate

for

more income after years of depressed corn prices, are abandoning traditional

crop rotation to grow exclusively soybeans or corn with dramatic added impact on

soil erosion and needs for added chemical pesticides. In the US some 41% of

all herbicides used are already applied to corn. Monsanto and other makers of

glyphosate herbicides like Roundup are clearly smiling on the way to the bank.

 

Going global with bio-fuels

 

The Bush-Lula pact is just the start of a growing global rush to plant crops

for bio-fuel. Huge sugarcane, palm oil and soy plantations for bio-fuel

refining are taking over forests and grasslands in Brazil, Argentina, Colombia,

Ecuador and Paraguay. Soy cultivation has already caused the deforestation of 21

million hectares in Brazil and 14 million ha in Argentina, with no end in

sight, as world grain prices continue to rise. Soya is used for bio-diesel fuel.

 

China, desperate for energy sources, is a major player in bio-fuel

cultivation, reducing food crop acreage there as well. In the EU most bio-diesel

fuel is

produced using rapeseed plants, a popular animal feed. The result? Meat

prices around the globe are rising and set to continue rising as far ahead as

the

eye can see. The EU has a target requiring minimum bio-fuel content of 10%, a

foolish demand that will set aside 18% of EU farmland to cultivate crops to be

burned as bio-fuel.

 

Big oil is also driving the bio-fuels bandwagon. Prof. David Pimentel of

Cornell University and other scientists claim that net energy output from

bio-ethanol fuel is less than the fossil fuel energy used to produce the

ethanol.

Measuring all energy inputs to produce ethanol from production of nitrogen

fertilizer to energy needed to clean the considerable waste from bio-fuel

refineries,

Pimintel's research showed a net energy loss of 22% for bio-fuel – they use

more energy than they produce. That translates into little threat to oil demand

and huge profit for clever oil giants that re-profile themselves as " green

energy " producers.

 

So it's little wonder that ExxonMobil, Chevron and BP are all into bio-fuels.

This past May, BP announced the largest ever R & D grant to a university, $500

million to the University of California-Berkeley to fund BP-dictated R & D into

alternative energy including bio-fuels. Stanford's Global Climate and Energy

Program got $100 million from ExxonMobil; University of California-Davis got

$25 million from Chevron for its Bio-energy Research Group. Princeton

University's Carbon Mitigation Initiative takes $15 million from BP.

 

Lord Browne, the disgraced former CEO of BP declared in 2006, " The world

needs new technologies to maintain adequate supplies of energy for the future.

We

believe bioscience can bring immense benefits to the energy sector. " The

bio-fuel market is booming like few others today. This all is a paradise for

global

agribusiness industrial companies like Cargill, ADM and Monsanto, Syngenta.

 

All this, combined with severe weather problems in China, Australia, Ukraine

and large parts of the EU growing areas this harvest season, guarantee that

grain prices are set to explode further in coming months and years. Some are

gleefully reporting the end of the era of " cheap food. " With disappearing food

security reserves and disappearing acreage going to plant corn and grains for

food, the bio-fuel transformation will impact global food prices massively in

coming years.

 

Another agenda behind Ethanol?

 

Uh Huh. The dramatic embrace of bio-fuels by the Bush Administration since

2005 has clearly been the global driver for soaring grain and food prices in the

past 18 months. The evidence suggests this is no accident of sloppy

legislative preparation. The US Government has been researching and developing

bio-fuels since the 1970's. The bio-ethanol architects did their homework we can

be

assured. It's increasingly clear that the same people who brought us oil price

inflation are now deliberately creating parallel food price inflation. We have

had a rise in average oil prices of some 300% since the end of 2000 when

George W. Bush and Dick Halliburton Cheney made oil the central preoccupation of

US

foreign policy.

 

Last year, as bio-ethanol production first became a major market factor, corn

prices rose by some 130% on the Chicago in 14 months. It was more than known

when Congress and the Bush Administration made their heavy push for

bio-ethanol in 2005 that world grain reserves had been declining at alarming

levels for

several years at a time when global demand, driven especially by growing

wealth And increasing meat consumption in China, was rising.

 

As a result of the diversion of record acreages of US and Brazilian corn and

soybeans to bio-fuel production, food reserves are literally disappearing.

Global food security, according to FAO data, is at its lowest since 1972.

Curiously that was just the time that Henry Kissinger and the Nixon

Administration

engineered, in cahoots with Cargill and ADM – the major backers of the ethanol

scam today – what was called The Great Grain Robbery, sale of huge volumes of

US grain to the Soviet Union in exchange for sales of record volumes of Russian

oil to the West. Both oil and corn prices rose by 1975 some 300-400% as a

result. Just how that worked, I treated in detail in A Century of War:

Anglo-American Oil Politics.

 

Today a new element has replaced USSR grain demand and harvest shortfalls.

Bio-fuel demand, fed by US government subsidies is literally linking food prices

to oil prices. The scale of the subsidized bio-fuel consumption has exploded

so dramatically since the beginning of 2006 when the US Energy Policy Act of

2005 first began to impact crop planting decisions, not only in the USA, that

there is emerging a de facto competition between people and cars for the same

grains. Lester Brown recently noted, " We're looking at competition in the

global market between 800 million automobiles and the world's two billion

poorest

people for the same commodity, the same grains. We are now in a new economic

era where oil and food are interchangeable commodities because we can convert

grain, sugar cane, soybeans – anything – into fuel for cars. In effect the

price of oil is beginning to set the price of food. "

 

In the mid-1970's Secretary of State Henry Kissinger, a protégé of the

Rockefeller family and of its institutions stated, " Control the oil and you

control

entire nations; control the food and you control the people. " The same cast of

characters who brought the world the Iraq war, the global scramble to control

oil, who brought us patented genetically manipulated seeds and now Terminator

suicide seeds, and who cry about the " problem of world over-population, " are

now backing conversion of global grain production to burn as fuel at a time of

declining global grain reserves. That alone should give pause for thought. As

the popular saying goes, " Just because you're paranoid doesn't mean they

aren't out to get you. "

 

* F. William Engdahl is author of the book, Seeds of Deception: The Hidden

Agenda of Genetic Manipulation, about to be released by Global Research

Publishing, and author of A Century of War: Anglo-American Oil Politics and the

New

World Order, Pluto Press. He may be reached via his website,

www.engdahl.oilgeopolitics.net.