Ventura County Star, CA
05-24-07
Krist: Full tanks, empty bellies
American fuel demands send food prices soaring
By John Krist
Residents of Louisiana, Texas and Mississippi are still feeling the effects of
hurricanes Katrina and Rita, which stomped, hacked and slashed their way
through hundreds of Gulf Coast communities in August and September of 2005.
Thousands of people remain displaced nearly 18 months later, occupying trailers
and wondering when or even if they might rebuild.
But the storms also had a direct effect on people much farther away. Katrina and
Rita altered the lives of people in Iowa and Montana, Vermont and California,
Kansas and the Dakotas. And fallout from the storms' destructive tour of the
American South has not remained within the borders of the United States; it has
affected the daily lives of nearly every human being in North, Central and South
America.
The catalytic agent that has made this possible is corn, the most widely planted
crop in the United States. To understand how corn could entwine the lives of
Mexican peasants and New Orleans jazz musicians is to understand something
profoundly disturbing about the global food system, which each day looks more
and more like the global petroleum business.
Three weeks before Katrina came ashore, President Bush signed the Energy
Policy Act of 2005. Among other provisions, the law required refineries to
incorporate a minimum of 7.5 billion gallons of renewable fuels in the nation's
highway fuel supply by 2012. The energy bill also contained tax incentives
intended to boost production and keep the retail price artificially low.
In practical terms, the only renewable fuel available in mass quantities in the
United States is ethanol, and the only commercially viable feed stock for U.S.
ethanol production is corn.
Katrina and Rita significantly magnified the appeal of the Energy Policy Act
subsidies. Within the storms' overlapping footprints was the densest collection of
oil and gas wells, pipelines and refineries in the nation. Between the shutdowns
ordered in anticipation of the storms' arrival and the damage inflicted by their
passage, the United States abruptly lost a quarter of its crude oil supply and 20
percent of its natural gas production. Energy prices particularly the retail price of
gasoline quickly soared.
The combination of federal subsidies and skyrocketing pump prices proved
irresistible, and private investment capital flooded into the ethanol industry.
According to the Renewable Fuels Association, an industry trade group, there
were 93 ethanol refineries at the time Hurricane Katrina struck, with another 23
under construction. Less than 18 months later, there are 116 operating ethanol
refineries and 78 under construction. Capacity has risen from 4.2 billion gallons
annually to 5.8 billion gallons.
Skyrocketing demand for corn to feed those refineries has had two effects: U.S.
farmers this year planted more acres in corn than ever before, and corn prices
are at record highs. For the first time in human history, the market price of a
staple food crop is being determined by its value as a vehicle fuel rather than its
value as something to eat.
Because the United States is a major exporter of corn to the world, rising corn
prices here translate into increased food prices everywhere. That's the principal
reason 75,000 people marched in Mexico City three months ago to protest tortilla
prices, which have doubled in a year. Subsidized American corn production in
the past artificially lowered global prices, driving many Mexican farmers off their
land often to seek work illegally north of the border and now subsidized American
fuel production threatens to deprive Mexico's poor of a dietary staple.
Americans are not immune. Because corn is a major component of poultry and
livestock feed, rising corn prices mean higher meat, egg and dairy prices. Corn
derivatives also are in nearly every processed food product in a modern
supermarket, so the ripples touch almost every meal.
According to a study issued last week by the Center for Agricultural and Rural
Development at Iowa State University, ethanol-related price increases have
added $14 billion annually to the nation's food bill already. The study also
projects that the combination of high crude-oil prices and continued subsidies
could boost ethanol production to more than 30 billion gallons a year by 2016, at
which point it would consume half the U.S. corn crop and add $20 billion a year
to the nation's food bill.
Most Americans can afford it; we spend a smaller percentage of our household
income on food than anyone in the world. But we are not likely to make any
friends in the global community if we force poor people elsewhere to endure
empty bellies so we can keep our gas tanks full.