Food and Fuel Fight for Future Resources
November 1, 2006
FOOD AND FUEL FIGHT FOR FUTURE RESOURCES
by Tip Tipton
A new challenge for the food industry is erupting throughout the world as many countries, including the United States , are uncritically rushing to rapidly increase the production of biofuels (ethanol, biodiesel) and the growth of crops to serve bioenergy markets.
The consequences are already obvious in several commodity markets with significant price increases for sweeteners, grains and food oils. However, this shift in use of resources will not only focus attention on the higher cost of food, but will also raise concerns on the potential damage to global wildlife habitats and biodiversity.
Nevertheless, governments around the world are preparing to implement policies that will stimulate as much production and use of biofuels as possible with no effective regard for the consequences to other economic interests or to social and environmental concerns.
Assumptions about energy security and environmental benefits of biofuels are largely unchallenged at the highest levels of government in the United States and Europe . Very recently important voices from within the food industry, along with scientific and policy experts focused on global change and on the protection of ecosystems and biodiversity, have begun to raise questions about the benefits and risks of rapidly expanded biofuels production.
The critical issues that need to be addressed are:
Substantially increased food crop prices triggering an upward domino effect of higher commodity prices and ingredient costs throughout the entire food chain, ultimately resulting in significantly higher food prices to consumers;
Disruptions and discontinuities in the availability of raw materials for the food ingredient supply chain;
Increased demand for limited supplies of water causing diversions of water from food crops to energy crop production;
Increased demand for cargo carriers before carrier capacity can be expanded, thereby creating logistical problems for transporting food and crops, and driving higher costs for transportation;
Possibly greater use of energy to produce biofuels than is provided by the biofuels products, while providing little or no benefit to greenhouse gas reduction or climate change; and
Adverse impacts on many other natural environments and ecosystems, creating more conflicts about agricultural impacts on wildlife and nature.
The most compelling immediate need is to collect, interpret and disseminate sound scientific data and information upon which public policy should be based. Foremost on that list is the effect on food costs in the United States and developing and underdeveloped countries.
Several states are considering plans to require fuels to contain a minimum amount of biofuels. Depending on the levels set and the timeframe for implementation, such actions could drive grain prices up substantially, causing feed prices to increase, thereby forcing higher prices throughout the entire food chain.
A Broader Perspective
The demand for energy is likely to increase by 50 percent over the next 25 years as developing countries, especially China and India , seek prosperity, and as rich nations endeavor to maintain an energy-intense lifestyle. More than three-fourths of the increased need for energy is expected to come from developing countries. Herein lays the challenge. Developing and underdeveloped nations need additional energy to expand their growing economies and as their economies improve, the demand for food expands, so it has a double-whammy effect on food prices.
Only a little more than one-third of the world's energy use is provided by oil. Other major resources are coal, natural gas and nuclear energy. Nuclear energy has been in decline for a long time but is making a strong comeback. China and India are slated to build several new reactors, and Europe and the United States are seriously considering investments in new nuclear capacity. However, nuclear power investments continue to face complex and challenging issues.
There is an unprecedented rush to alternative energy resources of which biofuels and biodiesels are but two. Other sources include solar power, wind, ocean waves and waste. There is great optimism here and significant investment. Yet even with expected double-digit growth, renewable energy is not forecasted to make up more than 2 percent of the total energy mix by 2030.
Oil remains and probably will remain for years to come, the world's most important energy source. The Organization of Petroleum Exporting Countries (OPEC), owners of most of the world's remaining oil supplies, will need to double production. ExxonMobil points to an abundance of reserves they believe still exist in the world. All told, they estimate total reserves at 7,200 billion barrels — about seven times the amount that has been consumed over the past 100 years.
And so, before piling biofuels subsidies on top of already bloated subsidy regimes for food crops, Congress and the Executive Branch should take the time to gather facts about the possible consequences to the nation and the world's food supplies.
Tip Tipton, chairman and chief executive officer of the Washington, D.C.-based Tipton Group, is the former CEO of the International Dairy Foods Association.