Friday, June 08, 2007

Biofuels: The Good, The Bad, and The Ugly

Reuters reports this day in an interview with Gustavo Best the UN's Food and Agricultural Organization (FAO). Best opines that biofuels-ethanol and biodiesel-done right can bring benefits to the food industry, but that there is significant risk to the 850 million people who are underfed.

Biofuels are a viable alternative to petroleum fuels if the price of crude oil remains above $40 per barrel, it is said, and they are also carbon neutral. The problem that Best sees is that a biofuel driven increase in the price of grains and vegetable oils may put additional pressure on the poorest among us.

FAO has published a comprehensive report on the subject of bioenergy that is worth a look. Although there is the danger that biofuel crop production could impact the availability of food crops for the poor, the report suggests that if biofuel crop production is properly managed it may actually make food more available for the poor. Second generation biofuel production from cellulose may mitigate this trend.

Significant price increases have been noted in all the crops now used for biofuel production and the types of foods that are normally produced-sugar, molasses, corn, soya, and other edible oils crops. Although this is not necessarily an issue in the US or Europe, it is an issue in the global village. If farmers in the third world start shifting over to growing diesel fuel, the effects on poor people are going to be problematic.

There is also an ethical construct that's hard to avoid, and that is the advisability of burning food to run Cadillac Escalades in Los Angeles and BMWs doing 200 kph on the autobahn. I've also felt that way about the corn stoves that people were selling a couple winters ago when the price of natural gas went skyward and I had a $300 bill every month from Count Dracula's son Midamerican Energy to heat the headquarters of this gigantic empire.

The idea of burning food runs right into what Brother Dave of the National Catholic Rural Life Conference talks about when he refers to eating as a moral, ethical and political act. It's an uncomfortable feeling.

Here on the prairie, we've seen a doubling in the price of corn and a shift away from soya acreage to plant more corn for the ethanol plants on the edge of town that are springing up like mushrooms on the lawn after a rain.

On the other hand, one of my spies in the commodities trade tells me that many of the new ethanol stills are contracted for less than half of their projected needs over the next few years. This makes me think that the ethanol people either think there will be a major price decline as the new corn acreage comes on line this fall, cellulosic ethanol is going to be a reality, or else they're going to get their asses handed to them. Time will tell.

Perhaps some of this planting is in the nature of cashing in while the opportunity presents itself-farmers all know that good times don't last forever.

Either way, for cattlemen and hog producers there's a shift away from feeding corn in favor of distiller's grains, which is one reason why there's a benefit to corn based biofuels that's not well understood outside the farm belt.

It is a good feed, but careful attention must be paid to the science of feeding so as to obtain the maximum benefit while maintaining the quality of the finished animal.


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