Ethanol and rising food prices.

[DnD Addict]

I've heard it implied and outright stated numerous times that corn based ethanol was at least partially responsible for rising food costs. This has never made any sense to me.

My reasoning:

A) The majority of corn goes to feeding livestock

B) When producing ethanol, there are wasteproducts which are DDG or DDGS (Dried distillers grain)

C) Both of the waste products can be fed to livestock.

D) DDG is suppose to have near the same level of nutrients as traditional feed. DDG is also far more compact, which should ease transport costs.

So why would corn based ethanol affect food prices? What am I missing?

 

[Sorry!]

I've heard it implied and outright stated numerous times that corn based ethanol was at least partially responsible for rising food costs. This has never made any sense to me.

My reasoning:

A) The majority of corn goes to feeding livestock

B) When producing ethanol, there are wasteproducts which are DDG or DDGS (Dried distillers grain)

C) Both of the waste products can be fed to livestock.

D) DDG is suppose to have near the same level of nutrients as traditional feed. DDG is also far more compact, which should ease transport costs.

So why would corn based ethanol affect food prices? What am I missing?

You think we will use the same amount of corn that they use to feed live stock for Ethanol?

 

[DnD Addict]

I think I remember hearing somewhere that about 75% of corn grown is used for livestock. Is that wrong?

 

[Sorry!]

I think I remember hearing somewhere that about 75% of corn grown is used for livestock. Is that wrong?

What's that have to do with anything? Even if we use 75% of corn for livestock feed you think that's going to be enough for Ethanol?

 

[russ_watters]

Sorry is right - your logic doesn't include an analysis of the quantities. If there is a reduction in corn available for feeding livestock, then there will be a rise in prices.

It almost sounds like you think that after you use corn to make ethanol, you're left with the same amount of corn (or useable waste product) available to feed livestock. And that's wrong.

 

[WhoWee]

Perhaps you should instead consider the dynamics of crop rotation. That is land allocated to corn production (for ethanol) that would otherwise be used for alternative crops (food).

 

[TheStatutoryApe]

http://www.reuters.com/article/idUSN1149215820070611
Approximately 20+% of corn in the US is exported as feed grain meaning that domestically there is an excess of corn feed and so supply/demand would drive the price downwards. But from what I understand due to increasing demand for corn for ethanol farmers can make more money selling corn for ethanol than they generally could producing for feed so the competition for this resource drives up the price for feed despite the excess supply and relatively lesser demand for feed.

http://www.grist.org/article/meat-wagon-waste-makes-haste/
As for ethanol waste as feed there are issues with this. As one might imagine industrial ethanol waste is not generally treated as something that may one day be consumed by a living thing. As a result it is a perhaps cheaper but less desirable feed product and there are obvious concerns about the use of industrial ethanol waste as feed grain.

 

[Jimmy Snyder]

DDG is suppose to have near the same level of nutrients as traditional feed.

I don't know if you call it a nutrient, but energy is something that animals get from food. I doubt that the same kernel of corn can fuel both a car and a cow. The underlying problem is that an ear of corn is grown vertically, but eaten horizontally. The energy lost in rotating the corn 90 degrees could heat 10% of the tents in the Arabian Desert.

 

[turbo]

I don't know if you call it a nutrient, but energy is something that animals get from food. I doubt that the same kernel of corn can fuel both a car and a cow. The underlying problem is that an ear of corn is grown vertically, but eaten horizontally. The energy lost in rotating the corn 90 degrees could heat 10% of the tents in the Arabian Desert.

Good post, volcano boy!

 

[Moonbear]

I don't know if you call it a nutrient, but energy is something that animals get from food. I doubt that the same kernel of corn can fuel both a car and a cow. The underlying problem is that an ear of corn is grown vertically, but eaten horizontally. The energy lost in rotating the corn 90 degrees could heat 10% of the tents in the Arabian Desert.

Jimmy may be half joking here, but the other half of this post makes a valid, and very important point. What you have left after you've extracted all the energy (calories) from corn is basically a vitamin supplement. Livestock, especially lactating livestock (i.e., dairy cows), have very high energy requirements. If you strip the corn of energy, it's pretty useless as a livestock feed.

Now, interestingly, humans and livestock could share the same corn crops for food, although there are generally crops grown specifically for feed with corn that we wouldn't like much. The reason is that humans only eat the corn kernels. The livestock can eat everything else (all those extra chambers in their stomach mean they can digest and use the fibrous parts of the plant that we can't eat).

There's a pretty small profit margin on food crops. Those buying grains for feed are going to pay as little as they can to keep their own costs down, because the consumer also is going to pay as little as they can to put food on the table. When you add in a competitor for the same resources who is willing to pay top dollar, because they are producing a commodity that they can get away with raising the price on if costs are high, it shifts the entire market.

And, yes, as others have pointed out, when someone can make a huge profit selling corn, they may do so at the expense of some other crop, like soybeans, wheat, peas, etc., which means supply is down and cost is up on those crops.

 

[mugaliens]

So why would corn based ethanol affect food prices? What am I missing?

Perception is a critical factor in over-elevated prices.

So is misperception.