Recently, an editorial writer for Forbes’ magazine, made a correlation between the Egyptian crisis and ethanol production in the United States. He claims that the U.S. government is making the production of corn more profitable for farmers because of the growing market for government backed ethanol. Because Egypt is the world’s largest importer of wheat, and U.S. wheat acres have been scaled back to produce more corn, Christian Wolan claims this has caused the shortage of food that sparked the unrest in Egypt.
However, if U.S. farmers are producing more corn because it is more profitable, then a sudden, long term demand of for U.S. wheat by foreign markets would cause the profitability of growing wheat to rise thus causing the demand to be met. Farmers respond to market demands and prices very well as has been seen with the demand for corn. Wolan claims that there is a higher percentage of corn being used for ethanol than in the past. What Wolan doesn’t take into account is that the yield per acre of corn has dramatically increased to the point where there is more than enough to satisfy the demand needed for food. As a matter of fact, by the year 2030, dry land corn is estimated to produce 337 bushels per acre. This figure nullifies any debate that corn cannot feed and fuel the world at the same time.
Egypt received most of its grain exports from other countries besides the U.S.. Floods and cyclones in these countries devastated their wheat crops thus placing the onus on U.S. wheat farmers to provide wheat shipments. What Wolan might not understand is that crops are a very inelastic good. Farmers cannot respond to demand at a moment’s notice. It takes a year for a crop to be developed from planting to harvest. If Egypt was a consistent importer of U.S. wheat, then American farmers would respond and meet that demand.
Millions of people are starving throughout the world every day. That is not the American agriculturist’s fault. Rather it is an issue of the economic and political institutions of these foreign countries which prevent the efficient trading of their good for U.S. goods. Maybe it was Egypt’s government’s failure to allocate resources efficiently that sparked these riots? Consider oppressive governments in the past such as Somalia that starved their people to submission.
The corn used for ethanol was originally taken from surplus corn thus not having any effect on corn prices. The fact that there is a demand for corn encourages the farmer to facilitate maximum productivity from his crop. This makes the increase in crop yields possible and the goal to feed the world’s 9 billion people by the year 2050 feasible. If corn wasn’t profitable for farmers, the yields and acreage devoted to corn would decrease, the bioscience breakthroughs would not be developed, and the U.S. would not be able to export millions of metric tons of this grain to foreign countries when the increasing world population demands it.
The ethanol industry has revolutionized the corn market and has ensured that the world will never be wonting for this valuable grain in years to come when the earth has 2.3 billion more mouths to feed. The ethanol market keeps corn profitable in the bad years, is a long term solution to the world’s energy needs which ultimately drive the economies that feed the world, and streamlines advances in bioscience which allows the corn yields per acre to consistently increase. This increase in yield offsets the amount of corn that is used for fuel. The percentage of corn that is used for ethanol might be higher than it was five years ago, but the bushels used for food have increased due to such higher yields. This would not have been achieved without a consistent demand for this grain.
If ethanol is an evil, it is by far the lesser of two evils. Until Wolan, or anybody else can come up with a better solution to effect the justifications that I just described, I find that such criticisms are unwarranted and an impediment on those trying to better the long-term future for mankind.
You can read Christian Wolan's editorial here: http://blogs.forbes.com/christianwolan/2011/02/03/is-ethanol-to-blame-for-egypts-unrest/
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