Fermenting the Food Supply

Modelling Biofuel Production as an Infectious Growth on Food Production

Biofuel capacity or production as a fraction of food supply for three different cases, along with sigmoidal (ie logistic) projections, 1998-2018. Plum curves show US corn ethanol processing capacity in service or under construction as a fraction of ethanol potential of entire US corn crop. Brown curve shows actual production of US ethanol as a fraction of ethanol potential of US corn crop. Violet curve shows global biofuel production as a fraction of estimate of biofuel potential of entire global human food supply. Sigmoidal curves all have K = 1/3 (infection doubling time of three years), and cross the 50% line at 2008, 2010.8 and 2014.2 respectively. Sigmoids are scenarios, not forecasts. Actual biofuel production growth will depend heavily on oil prices and policy responses to increasing food prices. See text for sources and methods.

Many people are aware that food-based biofuel production has had an influence on food prices. Many people also know that US ethanol production is growing rapidly and now using a noticeable fraction of the total corn supply. However, I'm going to argue that the situation in the near term is potentially more serious than is generally realized.

I will use a mixture of existing data, analysis of biofuel profitability, and simple modeling of biofuel production as an infection or diffusion process affecting the food supply, to demonstrate that there are reasonably plausible scenarios for biofuel production growth to cause mass starvation of the global poor, and that this could happen fairly quickly - quite possibly within five years, and certainly well within the life of the existing policy regimes. It doesn't have to be this way, but unless we start doing things differently soon, the risks are significant.

This piece is very long, and I apologize for that. But I think it's important - I'm coming to the view that biofuel growth is by far the greatest near-term challenge arising from the plateauing of global oil supply that we have experienced over the last two years.

I'm going to focus a lot on the US corn ethanol situation, because it's where the pattern has developed the furthest, and it's also where we have the best data. Then I will broaden out to look at the global situation where I think the same pattern is developing, but a few years behind. Let's first look at global biofuel production just to orient ourselves.

This next graph shows (in the lower panel) the annual production numbers for ethanol and biodiesel from 1975-2006. Here, and throughout, I am going to use volumetric units of millions of (42 US gallon) barrels/day, for the convenience of those of us used to thinking about oil supply. However, be aware that the energy content of biofuels is lower than that of fossil fuels (ethanol has only about two thirds of the energy content per gallon that gasoline has, for example).

Major components of global biofuel production, 1975-2006 (bottom), with oil prices (top). Sources: Worldwatch Institute for biofuel production through 2005, and various sources for 2006 (1, 2, 3, 4). Oil prices are sourced from BP and are expressed in 2006 US dollars.

This graph shows the major facts. Beginning from a very small base in the 1970s, by 2006, biofuel production reached about 1 million barrels/day, a little over 1% of the roughly 85mbd of liquid fuel production in that year. Ethanol is the largest flow by far, but biodiesel has started to become important. Growth of both products in the last few years was explosive - that is a key fact at the core of the problem. Furthermore, that growth is correlated with oil prices (shown in the panel at top). When oil prices are high, biofuel production increases rapidly, but when oil prices are low, biofuel production grows more slowly or stagnates.

This next graph shows US ethanol production (almost all of which comes from corn) as a fraction of the global biofuel supply:

US ethanol versus global biofuel production, 1980-2006. Sources: US figures are from Renewable Fuels Association. Global figures from Worldwatch Institute for biofuel production through 2005, and various sources for 2006 (1, 2, 3, 4).

As you can see, the US is a major biofuel producer, but both the US and non-US supplies have been growing rapidly. The reason the US corn ethanol supply is growing so rapidly is a large number of new ethanol plants being built (as well as expansions of existing ones). Here are the numbers from the Renewable Fuels Association (they have a very helpful list of every plant in production or under construction):

US ethanol plants in production or under construction at year end, 1998-2007. 2007 numbers may be a month or two earlier than the end of the year. Sources: Renewable Fuels Association.

As you can see, there has been a huge construction boom in the last few years. Looking at 2006, when we had 317kbd of ethanol produced in the US, that was coming from about 100 ethanol plants. Thus the average ethanol plant only produces 3kbd of ethanol - miniscule by oil industry standards. The blue lines indicate the average time for the population under construction to become the population in production at various points along the way. That lag is only 1-2 years, very short by oil industry standards. I think these are important points - these plants are very small, and they can be ramped up quickly at quite modest levels of investment. Thus the biofuel supply can respond quickly to changes in profit incentives of ethanol plant operators. There's quite a lot of these plants now, and a lot more on the way.

For me, always the most important thing about some flow is to understand how it relates proportionately to other relevant measures in the situation. And what I want to do now is relate US ethanol production capacity to the US corn crop. That requires converting bushels of corn (which the USDA National Agricultural Statistics Service keeps track of), to ethanol. The National Corn Growers Association has statistics for that, as follows:

Conversion efficiency of corn to ethanol over time. Sources: National Corn Growers Association.

As you can see, the efficiency of ethanol plants is rising slowly, but appreciably. Note that the NCGA has a theoretical estimate for 2014. I figure they are doing their jobs well, which is to be a trade group and aggressively promote the interests of their members, so in my extrapolations later, I used the linear extrapolation of the historical trend, rather than something based on their 2014 estimate (the red dot).

Let's just pause a moment and figure out how much food we are talking about when we discuss bushels of corn, or gallons of ethanol. A bushel of corn is 56 lb (or 25.4kg) of corn. At about 8000 btu/lb we get 113120 kCal/bushel. Given the average human diet globally contains 2800 kCal/day (see figure below), 1 bushel represents 40 days worth of calories for a person (if that person eat only corn!). Thus at current conversion efficiencies of about 2.8 gal/bushel, the corn in a gallon of ethanol represents a shade over two weeks worth of food (again, all corn). A 15 gallon fuel tank of ethanol is thus 7 months worth of corn calories for one person. Of course, the American corn crop is mainly fed to animals, and after conversion to meat, eggs, or dairy at efficiencies in the range of 1/10 - 1/3, the 15 gallon tank of ethanol is more like 1-2 months worth of food calories for a person.

Anyway, given the USDA corn production statistics, NCGA conversion efficiencies, and RFA data for the amount of ethanol production capacity on stream or under construction, I made the following graph:

Capacity of ethanol plants at year end, in production and under construction (stacked on each other), together with total ethanol potential of the entire US corn crop (not stacked). Expressed in millions of barrels/day of ethanol. Sources: USDA National Agricultural Statistics Service for corn production, National Corn Growers Association for conversion efficiencies, and Renewable Fuels Association for ethanol plant capacities.

This graph completely floored me from the moment I saw it, and immediately suggested the conclusion of this piece. Let me try to develop the argument in stages though. The first thing to note is that the corn crop generally increases over time. This is due both to ongoing improvements in the yield/acre of modern industrial agriculture, but also increasing acreage planted to corn versus other crops (especially in 2007). The corn crop also fluctuates, both due to acreage decisions and the vagaries of the weather.

More importantly, the amount of ethanol processing capacity is growing much faster than the corn crop. Whereas in 2006, the US produced 317kbd out of a global total of 982kbd, once all the construction under way is complete, the US will be able to produce almost 1mbd by itself. Let's focus in on the ratio of the ethanol processing capacity (both finished and under construction) to the corn crop. That looks as follows:

Capacity of ethanol plants at year end, in production and under construction, as a percentage of total ethanol potential of the entire US corn crop in that year. Sources: USDA National Agricultural Statistics Service for corn production, National Corn Growers Association for conversion efficiencies, and Renewable Fuels Association for ethanol plant capacities.

Starting out from 7% in 1998, the percentage of the corn crop covered by ethanol plant capacity in progress has now reached 37-38% of the corn crop.

Furthermore, the general shape of this graph is very familiar to me, and strongly suggests thinking of the process of ethanol conversion of corn as an infection process (or spread process, or diffusion of innovations process, to use various terms from different disciplines for more or less the same kind of thing). There are a large variety of processes in both the natural and social sciences which have the general flavor of something spreading exponentially in a finite setting, and then slowing down as it saturates the finite available capacity. An infection spreading through a vulnerable population of plants or animals is one classic example. The diffusion of a new product or innovation through a marketplace of potential users of that product is another. An invasive plant or animal species spreading through an ecosystem new to it is another case.

In the context of corn ethanol plants, the general idea is that if the existing plants are doing well and making money, there is a basis for building more of them. Because there are plants already operating successfully, there are a set of skilled employees, managers, and contractors that know how to build and operate ethanol plants. There are investors who are comfortable enough with the industry to risk their capital and are excited about the returns that building more plants might offer. There are farmers who are aware of the possibility of selling corn to ethanol plants if there was one close enough (or forming co-operatives to start their own). And there are marketing and distribution channels that know how to get ethanol sold to final consumers.

The larger the industry is currently, the more new plants it could potentially implement next year. (Its desire to do so will be heavily influenced by current profitability, but let's return to that point in a few paragraphs). So when things are going well, a young industry naturally grows exponentially - the amount of new capacity each year is proportional to the existing size of the industry. Eventually, however, any industry tends to mature - something or other limits further growth. In most cases, it's lack of further customers interested in the product. However, the corn-ethanol growth process faces another obvious limit, which is that it cannot convert more than 100% of the corn crop to ethanol.

To try to help your intuition for growth/spread processes, I'm including the following short video. The spread of a computer worm or virus through a population of vulnerable computers is another example of exponential growth in a finite situation that I am particularly familiar with, having being involved heavily in research on it a few years back. This example, made by collaborators of mine, shows the progress of the Code Red worm spreading across the globe in 2001 (the size of the red balls depend on the number of infection cases in each city):

Animation of spread of Code Red computer worm on July 19th, 2001. Source: CAIDA.

Notice the way nothing much seems to happen for a while, then the infectious agent seems to infect lots of cities at large scale very quickly, then slows down as it runs out of vulnerable computers to infect. That's a classic property of exponential-spread-in-a-finite-system situations.

Looked at globally, computer worms infect cities, because that's where the computers are. By contrast, ethanol plants infect areas with a lot of corn:

Location of ethanol plants onstream and under construction. Sources: USDA: Ethanol Expansion in the United States, plotting data from the Renewable Fuels Association.

Hopefully this suggests to you, as it does to me, the visual metaphor of little dots of red and pink mold growing in a Petri dish (yet another case of exponential spread in a finite system).

The simplest model of exponential spread in a finite system is called the logistic equation, which gives a simple sigmoid (S-shaped) curve. It's called the SI model in epidemiology. I'm going to spare you the math, since it's well discussed elsewhere. At the time of the Code Red computer worm, I happened not to be familiar with that piece of math, and I rederived the equation in the middle of the night as the worm was spreading and I was trying to predict how long it was going to take before it saturated ("saturated" meaning that it ran out of vulnerable computers to infect). I ended up with a graph like this:

Rate of infection attempts at one location on the Internet due to Code Red worm on August 1st, 2001. Blue line is data, and red line is logistic model. Sources: S. Staniford, V. Paxson, N. Weaver, How to 0wn the Internet in your Spare Time.

That particular infectious agent was a fairly simple-minded thing, and it followed the simple model very well indeed. Note again the pattern of a long period of very little sign of growth, then the rapid rise in the graph when most of the infections occur, and then the tail off as the worm struggles to find the last few uninfected computers amongst a sea of already infected ones. Once you are in the middle of that graph, things are going pretty fast. It's this that leads, in infectious disease control, to the huge emphasis on quarantining the early cases. It's so much easier to put a stop to an infection that hasn't got a grip yet, versus one that has already gotten a good grip on a sizeable fraction of the vulnerable population and is now making new infection attempts in all directions at a huge rate.

Which is the perspective that I bring to 40%, as the fraction of this years corn crop that could be processed by the ethanol capacity under construction. 40% is well into the steep part of a sigmoid. Let's take a look again at that graph of the ratio of ethanol capacity (producing and under construction together) to the ethanol potential of 100% of the corn crop. This time I'm going to add a sigmoid model extrapolated out into the future.

Capacity of ethanol plants at year end, in production and under construction, as a percentage of total ethanol potential of the entire US corn crop in that year, together with sigmoid model with K = 1/3 centered on 2008. Sources: USDA National Agricultural Statistics Service for corn production, National Corn Growers Association for conversion efficiencies, and Renewable Fuels Association for ethanol plant capacities.

Ok, the fit is a bit rough - clearly this ethanol plant spread process is a little more complex and noisy than the computer worm I just showed you. Still and all, I think this graph should set off pretty serious alarm bells. The fit does look like it's capturing some of the important dynamics of this process, and it suggests that we'll be using almost all of our corn crop for ethanol in 5-7 years. That's not very far off. Should we believe it?

Let's investigate further. One of the major departures from a straightforward logistic spread model is that the doubling time (or equivalently the growth rate) has varied significantly through the life of the process. Let's look more closely at the changes in the growth rate of this ratio, along with oil prices again.

Bottom panel: capacity of ethanol plants at year end, in production and under construction, as a percentage of total ethanol potential of the entire US corn crop in that year (left scale), together with year on year change in that percentage (right scale). Top panel: oil prices (annual average in $2006). Sources: USDA National Agricultural Statistics Service for corn production, National Corn Growers Association for conversion efficiencies, and Renewable Fuels Association for ethanol plant capacities. Oil prices are sourced from BP.

I suggested earlier that the growth rate has a lot to do with oil prices, and I've made that more explicit in the graph above with the green lines. When oil prices spike up, a year or so later we have a new burst of ethanol capacity under construction (which then comes on stream 1-2 years after that).

(Note that the drop in the growth rate of the ratio in 2007 is largely a result of a 20% increase in the acreage put under corn from 2006 to 2007, due to the high demand for corn - this increase came almost entirely from reducing the acreage under soybeans and cotton. See p 18 here for details.)

You might argue that correlation isn't causation, and this suggests that it's important for us to assess the profitability of ethanol plants more carefully - clearly growth of the industry will have a lot to do with perceived profitability of ethanol plants, but do they actually get more profitable when oil prices go up, or is the low energy return of the ethanol process such that they don't actually do any better?

Let's start with the price of ethanol. I can't find raw data in the public domain, but I did find this graph of rack prices in various locations over the last ten years. (The rack price is basically the wholesale price at regional distribution terminals).

Rack ethanol prices at various points in the country May 1997- May 2007. Source: California Energy Commission.

It helps to understand the relationship between ethanol prices and gasoline prices. I took the graph above and made the contents of it the background to my own graph of gasoline prices (on the same scale). That gave this:

Retail and rack gasoline prices, national US averages, and ethanol prices at various points in the country (background). Source: California Energy Commission for background ethanol rack prices, and EIA for gas prices (which are all grade, all formulation national averages)

The purple curve is a national average retail price (average across all grades and formulations), while the blue curve is the rack gasoline price. Clearly, ethanol and gasoline prices correlate fairly well (as one might expect, given that the main end use of ethanol is to mix it into gasoline). However, wholesale ethanol prices are often higher than wholesale gasoline prices. This is possible for two reason. Firstly, gasoline formulators are effectively required in many states to include ethanol in gasoline for oxygenation (to reduce tailpipe emissions of carbon monoxide). In particular, the spike of ethanol prices above gasoline in mid 2006 is likely due to the phaseout of MTBE (a groundwater polluting oxygenator that Congress decided not to shield oil companies from liability for). Secondly, formulators receive a 51c tax credit for each gallon of ethanol included in retail gasoline. This allows them to pay more for ethanol than for gasoline and still make money.

The fact that ethanol prices tend to strongly correlate with gasoline prices is suggestive, but we also need to understand the costs of making ethanol. I have relied here on the outstanding USDA 2002 Ethanol Cost-of-Production Survey. (We are only looking now at operating costs, not capital costs, ie the costs of running the plant and making ethanol, not the costs of building the plant in the first place - which at that time averaged about $1.50 for each gallon/year of capacity). Let me summarize the operating costs from that survey in the next graph.

Ethanol operating margin analysis for 2002. Source: USDA 2002 Ethanol Cost-of-Production Survey for cost data and and DDG and CO2 revenue. California Energy Commission for ethanol prices.

This is rather complex, but let me try to explain the highlights. The left column represents a breakdown of the average costs per gallon of making ethanol. The largest item by far (blue) is the cost of the corn. The second largest item (yellow) is fuel to provide process heat in the plant. Generally, this has been natural gas in the past, but there is currently an ongoing shift towards using cheaper coal instead. The rest of the bars are all smaller - administrative expenses, enzymes, maintenance, etc, etc.

The right column of the graph represents the revenues for that gallon of ethanol. The bottom (pink item) is the revenue from selling the distiller's dry grain (DDG) residue left over from fermentation, which is used as animal feed. The brown column takes us up to the lowest ethanol price obtaining at any time in 2002 (from the earlier California Energy Commission graph). The blue column takes us up to the highest price of the year. 2002 was not a great year to be making ethanol, with operating margins ranging from a scanty 25%, to negative (selling the ethanol for slightly less than the operating costs of producing it). This was because oil and ethanol prices were relatively low in 2002.

This explains why capacity growth in 2003 and 2004 fell back to essentially zero.

To extend this analysis further, we cannot rely on survey data, which has not appeared since the 2002 survey. However, with just a little modeling, we can get close. What I did was to take the 2002 cost structure and divide it into three components: the corn, the natural gas, and everything else. The corn and natural gas components I extended to other years by using corn and natural gas price data. The "everything else" component I assumed to be more slowly changing and I just inflated it at a fixed 2 1/2% annual rate. I think this will get us fairly close. My cost structure model then looks like this:

Ethanol production operating cost model, Jan 1997-October 2007. Source: USDA 2002 Ethanol Cost-of-Production Survey for 2002 cost data. Corn prices came from USDA NASS, with conversion efficiencies from National Corn Growers Association. Natural gas costs were indexed from 2002 using price data from EIA. Other costs were computed from 2002 data by inflating at 2 1/2%/year.

As you can see, the main impact on the cost structure of ethanol producers is the price of the corn, which is quite volatile - varying by a factor of two over the course of the last ten years. Natural gas prices have been less important as a factor, and I assume they will get moderated further over time by switching to the use of coal.

We can now take this cost model and look at the rack price of ethanol against it:

Ethanol prices at various points in the country, along with operating cost model (with DDG revenue subtracted from costs). Source: California Energy Commission for background ethanol rack prices, and USDA 2002 Ethanol Cost-of-Production Survey for 2002 cost data and DDG revenues. Corn prices came from USDA NASS, with conversion efficiencies from National Corn Growers Association. Natural gas costs were indexed from 2002 using price data from EIA. Other costs were computed from 2002 data by inflating by 2 1/2%/year.

In my mind, this makes pretty clear what is going on. Making food into biofuel was profitable in 2000-2001, with oil/gas prices high, so the industry started to expand. It stopped being very profitable in 2002, so the industry stopped growing. Then it became hugely profitable in 2004-2006, and we had an enormous wave of expansion which is still coming to fruition. However, that additional demand has backed up into corn prices, which have now increased. Thus margins are falling, and we will probably see a drop in the growth rate of corn ethanol capacity for a while. However, if oil prices go up much further, then there will be another big growth wave. This one will be starting from around 35% or 40% of the corn crop and going up from there. Clearly, that will drive another big round of corn price increases.

So at this point, corn prices are indexed to oil prices via biofuel arbitrage. There are lags and imprecisions in that linkage, but corn prices cannot fall too far below gasoline prices, or biofuel production will become very profitable and the industry will quickly grow to the point that corn prices are bought back into relationship with oil prices. Furthermore, the large displacement of soybean and cotton acreage to corn in 2007 suggests that this arbitrage is quickly extending to other agricultural commodities. I by no means think that last process is complete, but it has started.

That's bad news because demand for oil is extremely inelastic, and the world is struggling to grow the supply of it at present, so over the medium term it seems fairly plausible that there will be further rises in oil prices. As we will see shortly, one can throw the entire global food supply at our fuel problems and still only make a modest impact on them.

Before we turn to the global situation, I want to make one last graph on corn ethanol. Taking the same cost model I just showed you, I made a graph that shows the cost of making ethanol as a fraction of the (retail) cost of a gallon of gasoline. In both cases, I subtracted the DDG revenue from the ethanol cost, but in one of the lines I also subtracted the 51c/gallon blending tax credit.

Ethanol production operating cost model as a fraction of retail gasoline cost, Jan 1997-October 2007. Green curve is cost net of DDG revenue. Plum curve is also net of 51c/gallon blending tax credit. Source: USDA 2002 Ethanol Cost-of-Production Survey for 2002 cost data. Corn prices came from USDA NASS, with conversion efficiencies from National Corn Growers Association. Natural gas costs were indexed from 2002 using price data from EIA. Other costs were computed from 2002 data by inflating by 2 1/2%/year.

As you can see making ethanol has been getting steadily more profitable, and the unsubsidized margins are recently getting comparable to the subsidized margins back in 1997. (The fit lines are exponential just to guide the eye to the trend - I have no great confidence in the extrapolation).

Let's now turn to the global picture.

Last year, President Fidel Castro of Cuba alleged that plans by developed countries to power cars with biofuels risked starving up to 3 billion people. While I am no fan at all of communist dictators, I fear he might have a point here. I established above that biofuel profitability/growth creates an arbitrage between oil prices and corn prices. We will see that the same trends are going on globally. They aren't as advanced, but the basic mechanism are going to be the same, and the growth rates are comparable. With fuel prices and food prices linked together, then the dinner tables of the poor are in a competition with the gas tanks of the global middle and wealthy classes. And we already figured out that a 15 gallon tank of ethanol is 7 months worth of corn calories for one person.

Let's start with the UN Food and Agriculture Organization's statistics on energy in the global diet:

Global food energy intake per capita, 1960-2002. Source: FAO.

As you can see, at least until 2002, the world has been getting better and better fed. This comes despite the global increase in population over the period:

World population, 1960-2005. Source: US Census.

So far, so good. Multiplying the food intake by the population, and noting that 1 kilocalorie is 4.184 kilojoules, we can derive the total energy content of the global human food supply:

Total energy in global food supply, 1960-2002. Source: US Census for population, and FAO for food intake.

Since the amount of land in use has been fairly constant, most of the increase in food energy over this period has come from steadily increasing crop yields.

A petajoule is 1015 joules, or about 278 million kilowatt-hours. Ok, so is 70 odd petajoules a lot, or a little? To answer that question, I'm going to compare the food supply to the global supply of liquid fuel via a notional conversion to biofuels. For the cereal portion of the human diet, I can straightforwardly apply the exact same conversion factors as for corn above (on the theory that a calorie of rice or wheat can be induced to make about the same amount of ethanol as a calorie of corn - a little more than 50% of the calories in the corn make it into the ethanol).

The rest of the diet is more complicated - it ranges from things like lettuce and celery that are probably poor prospects for biofuel feedstock, through things like potatoes and cassava which would probably do about as well on a per-calorie basis as cereals, and then to meat, eggs and dairy products which have, in many cases, been converted at low efficiencies from cereals. I'm not in a position at the moment to make a precise accounting of this, so I just assume as a rough calculation that these things will cancel out, and I directly translate 1 non-cereal food calorie to 1 ethanol calorie. That assumption could be off by a few tens of percent, but it wouldn't make any difference to the overall conclusion if it was.

Given all that, I can estimate the volume of ethanol equivalent of the global food supply, and compare it to the actual liquid fuels. (Again, remember in these volumetric calculations that the ethanol barrels are really only 2/3 as good as the oil barrels).

Ethanol equivalent of human food supply compared to global liquid fuel supply, 1965-2002. Cereal and non-cereal portions of food supply are stacked, but fuel is not stacked on food. Source: US Census for population, and FAO for food intake. Liquid fuel numbers are from BP.

You can immediately see the problem here. The biofuel potential of the entire human food supply is quite a small amount of energy compared to the global oil supply - somewhere between 15-20% on a volumetric basis, so 10-15% on an energy basis. If you look at the rate of growth from the mid 1980s to 2000 (and it would be similar to 2005 but the graph doesn't go that far), we were requiring about an additional 10mbd per decade. So if we continue to try to drive more at historical rates of growth, eg as the middle class in China, India, and other developing countries continue to build roads and get cars, while our oil supply is stagnant, we can only get about a decade or thereabouts from converting our entire food supply to fuel.

However, just because it's not a very good idea globally, doesn't mean it wouldn't be profitable to the folks doing the conversion. Let's look at the growth rates in global biofuel production, and compare them to oil prices.

Annual change in biofuel production, 1975-2006 (bottom), with oil prices (top). Sources: Worldwatch Institute for biofuel production through 2005, and various sources for 2006 (1, 2, 3, 4). Oil prices are sourced from BP and are expressed in 2006 US dollars.

Again, we see a mirror of the US situation - when oil prices are high, biofuel production growth rates respond very dramatically in a short time. When oil prices are low, biofuel production almost stops growing. With the increasing oil prices of recent years, global biofuel production is up by a compound annual growth rate (CAGR) of 23.8%/year from 2001-2006. This next graph shows extrapolations of global food supply (expressed as mbd of ethanol), extrapolated on the highly linear trajectory it's been following, with biofuel production continuing to grow at 23.8%:

Biofuel production and energy equivalent of food supply, 1975-2018. Food is extrapolated linearly. Biofuel production is extrapolated at the CAGR of growth from 2001-2006 (23.8%/year). Sources: as above.

It appears that the biofuel production will be catching up to the food supply very quickly. Clearly, we are in the same exponential-growth-in-a-finite-box situation, again. It's just earlier in the process than with the US corn ethanol situation.

To make this comparison clearer, this next graph shows three things. Firstly, I repeat the same ratio I showed you earlier (US ethanol capacity in production and under construction divided by total corn crop ethanol potential). I also repeat the same sigmoid I showed you before. For the global case, we don't have capacity under construction estimates, just actual biofuel production, which I show as a ratio to the biofuel potential of the global human food supply. To help make the connection, I have put the US ethanol production on the same graph, as a ratio of the US corn crop ethanol potential again. The latter is just a couple of years behind the capacity build-out curve.

With the idea that the dynamics are roughly the same here, I've put the same sigmoid with the same basic doubling time as a projection for all three cases. I just shifted the time offset - the global production curve is offset about 3 1/2 years behind the US corn ethanol production curve.

Biofuel capacity or production as a fraction of food supply for three different cases, along with sigmoidal (ie logistic) projections. Plum curves show US corn ethanol processing capacity in service or under construction as a fraction of ethanol potential of entire US corn crop. Brown curve shows actual production of US ethanol as a fraction of ethanol potential of US corn crop. Violet curve shows global biofuel production as a fraction of estimate of biofuel potential of entire global human food supply. Sigmoidal curves all have K = 1/3 (infection doubling time of three years), and cross the 50% line at 2008, 2010.8 and 2014.2 respectively. Sigmoids are scenarios, not forecasts. Actual biofuel production growth will depend heavily on oil prices and policy responses to increasing food prices. See text for sources and methods.

The underlying idea is that both oil and cereals are global commodity markets. If it's profitable to make food into fuel in the US, even without a subsidy, then it's profitable elsewhere also - possibly more so given lower labor costs. So the basic growth dynamics are the same. The infection just hasn't got as strong a grip on the whole globe yet, but it's growing at similar rates.

I want to stress something here about the implications of the recent growth rates for the timing of the problem. Something growing at 25%/year growth doubles in three years. So in both the last two graphs with different extrapolations, you see global biofuel production hitting half the global food supply within about six or seven years. We'll discuss in a moment what factors could stop that from happening, but first I just want to point out that these time constants render cellulosic ethanol irrelevant to the issue.

Cellulosic ethanol is what most most advocates of biofuels assume that the future will belong to. It is ethanol made out of the cellulose in various kinds of agricultural waste, fast-growing grass or tree crops, etc. In an abstract, in-principle, kind of way, it might indeed be possible some day to produce a lot of fuel this way, since current global consumption of about 8 gigatons of fossil fuel carbon is an order of magnitude smaller than the roughly 60 gigatons of carbon fixed by the world's plants (net primary productivity). However, cellulosic ethanol is not commercially practical today, and there are reasons to wonder whether the transportation and material handling issues will be overcome soon. At the moment, there is a single pilot plant operating in the world at a non-commercial scale, and otherwise the technology is in the lab.

Let's grant, for the purpose of discussion, that all the problems will get solved and cellulosic ethanol will get off the ground commercially a couple of years from now. It won't have any meaningful impact on what happens with food-based ethanol. Remember the Code Red video, and the shape of the sigmoid curve? Remember how the infectious agent spends a long time quietly multiplying below the radar screen till it gets into the sharply rising part of the curve and seems to take everything over all at once? Cellulosic ethanol is at the very beginning of that long growth process. Food based ethanol is on the steep part of the curve already.

Ok. So this is all incredibly bad news. What could stop this process from continuing?

Well, I think there are three major possibilities worth mentioning. Again, the key point is that the spread rate of biofuel plants is controlled by the profitability of those plants. That in turn is mainly set by the difference between oil prices and food prices.

So, for possibility number one, if oil would go back down to $20 a barrel, that would certainly do the trick. There are people who continue to believe that the current stagnation in oil supply will end soon, and allow prices to fall. I'm not going to spend a lot of time on that possibility: we're still waiting, alas. Those who would claim oil will go back to $20, or $35, or $40, or $60, are getting quieter and quieter as it passes the $100 mark. My own view is that we are on the bumpy plateau of global oil supply. I do not expect either large increases or large decreases in oil supply any time soon, though small increases and decreases are certainly possible. If that is correct, I expect oil prices to increase in the medium term, though certainly they could go down in the short-term if the credit crunch affects the global economy enough.

The second way that biofuel conversion of food could sharply slow is when food prices get high enough. This is certainly going to happen before 100% of the food gets turned into fuel. The question is, at what point? When we have a bidding war between the gas tanks of the roughly one billion middle class people on the planet, and the dinner tables of the poor, where does that reach equilibrium?

This is not an easy question to answer. The situation is unprecedented enough that it's not easy to find good data with which to project the situation. Significant uncertainty remains, but I have found a couple of ways of making rough estimates, both of which produce similar answers.

One thing that probably puts a lower bound on the number of persons affected by large food price increases is the number of people who were already chronically hungry. The UN, as part of its Millenium Development Goals effort, has statistics on how many people currently cannot meet minimum dietary energy guidelines. Throughout the 1990s, that hovered around 800 million people:

Global population unable to meet minimal dietary energy requirements according to UN Millenium Development Goals Indicators.

Presumably, it remained a similar number, at least until the major food commodity price increases of the last couple of years. I wouldn't claim to be very knowledgeable on this, but I struggle to imagine how someone who wasn't meeting minimum dietary guidelines already can continue to exist on half as much food, or a quarter as much food, as food prices come into equilibrium with the current oil price level, or perhaps double again should oil prices double again. I would imagine that if you are hungry all the time you would already be devoting most of the skills and resources available to you to the problem of eating, and you would have limited ability to increase that in the face of large increases of food prices.

This still leaves the question of how many people who were able to meet their minimal dietary needs at historic food price levels might not be able to do so at doubled or quadrupled prices.

I managed to find some data for food consumption elasticities across a broad range of countries in a USDA study Cross-Country Analysis of Food Consumption Patterns by Regmi et al. The most important graph is the price elasticities:

Food income elasticity by country income according to Regmi et al..

The definition of the price elasticity is that it's the ratio of the percentage change in quantity consumed as a result of a certain percentage change in price. For the low income countries in the sample, price elasticity is about -0.7. Thus a 10% increase in price would be expected to result in about a 7% reduction in food intake. It's not clear that elasticities can safely be scaled up to very large changes in price, but if they could, a 100% price increase would imply a 70% decrease in food consumed, which would presumably create severe hardship or death by starvation for most people in poor countries (unless their income derived from growing food, and they had secure title to their land).

The definition of low-income country in the Regmi et al study is that it has less than 15% of US per-capita income. Per capita income in the US in 2000 was just a hair less than $30,000, so 15% of that is $4500. According to this global income distribution data,

Global income cumulative distribution according to Chotikapanich et al..

for which I've blown up the low end here,

Low end of global income cumulative distribution according to Chotikapanich et al.. Pink line represents the $4500 income level.

about two-thirds of the world's population would fall into the low income category, and thus would apparently be extremely vulnerable to doubling or quadrupling of food prices. For another approach to the same thing, we can look at income elasticities (the ratio of the percentage change in food consumption produced by a certain percentage change in income):

Food income elasticity by country income according to Regmi et al..

Here the value for the lower-income 2/3 of the world's population is about +0.7. What this means is that a 10% reduction in income has about the same effect on food consumption as a 10% increase in food prices. This suggests that we can use the global income distribution (shown above) to roughly estimate the impact of a doubling or quadrupling of food prices. We noted earlier that according to the UN about 800 million people are unable to meet minimal dietary energy requirements. That is 12% of the world population. On the income distribution (one graph back), the 12% mark corresponds to $1020/year in income (shown as the lowermost green dot). By looking at the $2040 level (36% of the global population - second green dot up), and the $4080 level (61% of the global population - third green dot up), we can estimate that a doubling in food prices over 2000 levels might bring 30% or so of the global population below the level of minimal dietary energy requirements, and a quadrupling of food prices over 2000 levels might bring 60% or so of the global population into that situation.

These estimates should be regarded as quite uncertain. Still, it seems hard to make a case that food price increases will cause a cessation of biofuel profitability before a significant fraction of the global population is in serious trouble. The poor will not be able to bid up food prices by factors of two and four and keep eating. In contrast, the quadrupling of global oil prices, and tripling of US gasoline prices, over the last five years has had very minimal impact on driving behavior by the middle classes.

The core problem is that gasoline price elasticity in the US is about -0.05, versus the -0.7 price elasticity for food consumption by poor consumers. This makes clear who is going to win the bidding war for food versus biofuels in a free market.

This brings me to the final thing that could stop runaway biofuel growth: public policy. So far, there has been a fairly broad coalition in favor of increasing ethanol production. This encompasses agricultural interests, environmentalists hoping to reduce carbon emissions and rely on a renewable fuel, and many citizens concerned about reliance on Middle Eastern oil supplies. The Renewable Fuels Association reported recently that 3/4 of Americans believe we should increase our reliance on ethanol. This kind of thinking has led to subsidies and mandates for biofuel production in the US, in Europe, and even in a number of developing countries.

My conclusion in this analysis is that this broad agreement is in fact mistaken. It is based on a failure to appreciate the speed with which high oil prices and profitable biofuel operations can fuel a very rapid growth of the industry up to the point that it consumes a sizeable fraction of global food production. This will have only modest benefits for global fuel supply, but will cause massive abrupt global hardship in poor countries. Many unforseeable consequences may follow from that.

I suggest we reconsider our policy.

Jeezus Stuart. This is like a Phd thesis. Seriously.
And the implications, though not completely surprising after reading TOD for two years, are overwhelmingly bad, and utterly believable.
This line from your conclusion is worth repeating:

The core problem is that gasoline price elasticity in the US is about -0.05, versus the -0.7 price elasticity for food consumption by poor consumers. This makes clear who is going to win the bidding war for food versus biofuels in a free market.

Thus equity, or the lack thereof will increasingly be a part of energy discussions.

Your post highlights yet another huge advantage of crude oil - its scale.

And if you merge your conclusions with the findings of the National Academy Report, "The Implications of Biofuel Production for US Water Supplies", it becomes pretty obvious that food is not the only other 'non-energy' resource that will be squeezed out trying to ramp up this strategy; water health, water availability, soil, environmental toxins, etc. all will be detrimentally affected. We are pulling everything in towards the center, from people, critters, natural systems, etc. to fuel profits, to fuel consumption, to fuel profits, etc. The adverse effects of this materials economy have been out of the public eye for a long time. Methinks the biofuels spectacle is going to bring them out into the open, and soon.

This policy must be reconsidered. Because as momentum creates more and more biomass processing/ethanol plants, there will be that many more special interests lobbying to keep them going. Man this is frightening... Thanks for your continued top notch work. Makes me want to go work on my addiction post right now, before I have my coffee.

Incidentally, I wonder how much wine/beer we consume, pints/gallons converted to barrels, netted down for ethanol content, compared to the gross projections for ethanol in your post??

Are advocating converting the wine production to ethanol? That's blasphemy! (Well brandy companies already do that but age it in oak and sell it for 100 $/gal)

On the other hand if you tell the populace: "wine or fuel" then agro-fuels would end really fast.

Very impressive, Stuart!

Despite the huge amount of information you have gathered, I missed seeing who makes the money from the ethanol production. I'd like to see how much they donated to certain political parties and which candidates!

I don't know but part of Obama's plan for energy independence and fighting global warming is biofuels as stipulated in the recent Democratic debate. He also supported CTL last year but has either abandoned that notion or is downplaying it as someone may have gotten to him on that one.

Now Stuart or someone needs to get to Obama because now it appears that he may be next President of the United States.

Illinois is a big corn producing state and a big coal producing state. Not too hard to figure out where Obama's advice has been coming from, there.

Yep, time for a change. Sure.

My assessment of the situation has always gone something like this:-

The energy content of the current global oil supply is about seven times the energy content of enough food to feed everyone on earth, so we could starve ourselves without having much impact on the fuel supply.

So, fuel from food is nothing more than a dangerous distraction from the peak oil problem. Stuart shows very well just how dangerous it is and how quickly the situation might deteriorate.

...meanwhile -on another planet?- Peter Kendall (president of the UK's National Farmers' Union) argues that:

"...What has been holding back agriculture in the developing world is not a shortage of land, but the rock-bottom prices caused by the fact that world markets have been swamped by surplus grain, from both the EU and US.

If the demand for biofuels helps to change that, directly by lifting prices and indirectly by mopping up the surpluses, then it will give Third World farming the biggest single boost it has ever had.

That, in turn, will do more to alleviate starvation in Africa and elsewhere than all the food aid programmes put together..."

-source P.Kendall, UK NFU.

Link: Biofuels 'will not lead to hunger'

Excellant article, another real eye-opener and well argued.


I think there is a kernel of truth in what he said, in that the income of farmers is already and will continue to rise. Some third world peasant farmers will benefit from an overall rise in market prices. The heaviest burden will fall on the urban poor in developing countries. But a caveat is that peasants in traditional societies often do not have legal title to their land in the sense a modern state would recognize it. Biofuel profitability will likely accelerate the trend of wealthy landowners finding a way to kick them off it.

Also, even in developing countries there are many people who, while they may not starve, are sure going to be extremely unhappy about the trend in food prices.

Recent experience with outsourcing the EU's animal feed production to South America IParaguay, parts of Brazil, parts of Argentine) points otherwise. The benefits of higher prices go to a limited number of large farmers and the indsutry which support them, the rural population gets driven off to the city slums and the rural areas concerned get 'used up' in 10-15 years, what's left is desert.

And now for the shamelss plug: a talk/discussion happening on soy in paraguay at CEDLA, Amsterdam, this friday at 1530hr.

Keizersgracht 397
1016 EK Amsterdam


Please note!! No admittance after the lecture begins

Soy production in the Southern Cone: the socio-economic and environment impact

Javiera Rulli (BaseIS Paraguay)

Referent: Barbara Hogenboom (CEDLA)

In the view of many researchers and activists in the global South and North, the model of intensive agriculture based on soy monocultures, production of fodder in one continent and agro industry in another, is extremely problematic. This model results in an emptying of the countryside, contamination of the environment and destruction of landscape and native cultures. According to Javiera Rulli, a biologist working at BaseIS Paraguay, the expansion of agribusiness leads to criminalization of social struggle and violence against indigenous, peasants and the poor in the cities. She will talk about the current tendencies and problems together with An Maeyens (soy campaigner for ASEED Europe) and Nina Holland (campaigner on agrofuels for CEO). To give an impression of soy production and its effects, some parts of a documentary about San Pedro (Paraguay) will be shown.

Javiera Rulli will present the outcomes of two recent studies. "Refugees of the Agro-export model" is the result from an extensive field research brought about in 2006 in Paraguayan campesino communities surrounded by GM soy monocultures. This investigation by a multidisciplinary and international group of researchers (lead by sociologist Tomás Palau) analyses the dynamic of impoverishment and degeneration of the ways of life of rural households, causing rural expulsion and migration to cities. "United Soya Republics" is a collection of contributions by Latin American activists and researchers that depicts the current status of the “Global soy model” that dominates the Southern Cone. The volume shows that soy is not just a crop, but a system that has geopolitical value and sustends an economical globalization of agriculture in function of corporate intere

Very impressive work!
I just have one remark: a large percentage of non-cereal calories is meat. A large fraction of meat producing animals are fed with cereals etc. Do we have worldwide figures for that? That should make your non-cereal million barrels per day more accurate, as farmers that produce animal feedstock will shift to biofuel feedstock. What percentage of worldwide cereal production is fed to animals? or, even better, what percentage of farmland produces animal feedstock?

I believe 2 factors will stop biofuel growth : price competition with food for developing countries, and price competition with animal feedstock, as meat is a product that most people in developed countries do not want to abandon. In public policy i have little hope. Ultimately, low EROEI, water and energy shortages and the much better alternative of solar power should finish the job.

"competition with animal feedstock"

Yeah, I think as prices rise we will see a rise in the fighting between entrenched lobbying groups. Already the meat industry is up in arms over the increased cost of feed. Then add the snack food and beer conglomerates, environmentalists and other groups and suddenly the political pressure to support ethanol starts to evaporate. At some point, hopefully, we see enough pissed off political donors NOT from the corn belt derail the biofuel trends outlined above.


Grain used as animal feed - about 36 % - fair to say a third.

During about the last 50 years, production of meat products (and eggs) *per capita* has doubled, and the trend is ever upward, as the Chinese and others take to chomping big Macs instead of, or as well as, chop-sticking rice with a few scraps of fish in it or half an egg.

Grain to fuel - about 2-3%, or under 3%. Or rising a bit in 2007...

The rest is eaten by humans. In one form or another. Bread, pancakes, spaghetti, burghul mush, nans, muesli, couscous, oatmeal, rice, etc.

These numbers are rough; a sort of average of different numbers, studies, etc. There is no definite authority (afaik.) Easy to look up.

36 %, i thought it would be more like 50-70, as animals eat about 4-6kg of grain for one kg of meat produced and we have 1.3 billion heads of cattle + more billions of pigs + 24 billions of chicken (according to wikipedia). Anyway, the biggest disadvantage of ethanol is that its efficiency is below 0,1-0.5% (from sunlight to useful energy) so solar panels are 2 orders of magnitude better.

Terrific Terryifing post Stuart, this is exceptional quality.

Ill will send this one around in the Netherlands to a multitude of organisations.

Excellent analysis in general. Don't like the faulty obviously biased analogy to viruses and infections though.

I think most ethanol supporters are aware of this stuff, at least I am.

The starving have no money to buy corn so whether the corn is used for ethanol or not is irrelevant to them.

Trying to blame ethanol for the situation developing due peak oil is silly IMO. It is the inappriate pricing of corn that enables the ethanol industry to thrive. If corn were priced for it's energy content, which now would be about $9.00/bu., the ethanol problem addressed in the analysis would largely solve itself.

Trying to stop ethanol now with political action will be very difficult. Ethanol now has a constituency just as oil does. Oil is powerful enough to get it's way with wars, low taxes on gasoline and such. Ethanol is now a somewhat less powerful lobby, but it is strong enough to stop ill conceived measures that would largely benefit foreign citizens. Ethanol is here to stay, get used to it.

"Let those poor go to the prisons and the Union workhouses," is Scrooge's reply to the plea for Christmas charity. "And if they would rather die, they had better do it, and decrease the surplus population."

Ask not for whom forced food and energy conservation comes, it comes for thee.

"The starving have no money to buy corn so whether the corn is used for ethanol or not is irrelevant to them". The problem is all the many people in the tail of the income distribution who have a little income, but not really enough. Their money is going to go less far, and therefore they are going to get hungrier.

"Trying to stop ethanol now with political action will be very difficult. " No question you are right about that.

Ethanol now has a constituency just as oil does. Oil is powerful enough to get it's way with wars, low taxes on gasoline and such. Ethanol is now a somewhat less powerful lobby, but it is strong enough to stop ill conceived measures that would largely benefit foreign citizens. Ethanol is here to stay, get used to it.

Yes, notice that ethanol's clout has managed to give a farm-state Democrat the momentum over the former Democratic front-runner. Can someone remind me when God gave Iowa the authority to choose our presidents for us? Don't expect fast change for politics. Those three billion who may be headed for starvation had better get some good lobbyists quickly.

What an excellent post to start the week with. When you look at things from a Macro/Global perspective it all becomes so much clearer.

I used to think that once subsidies would go away, agro-fuels would simple get out of business for their very low EROEI would make uncompetitive against other liquid energy vectors. But as this post shows the demand for agro-fuels will still be there (very low elasticity) and in the end agro-fuels will compete mainly against food. And this changes the whole picture because food has essentially the same energy inputs as agro-fuels.

Stuart, if you have the time it might be worth to model operational costs growth, factoring feedstock growth. It is likely that grain prices will rise much faster than oil this year; the same could happen again with coal.

How many people of those who live with less than 5000 $/a practice subsistence agriculture? When you live from subsistence agriculture your income can be 0 and you strive. That's hardly the case today when pure subsistence agriculture is mostly gone, but in developing countries, ballpark 60% of the population has to grow most of their food. In this point I diverge from you and Castro, I'm not certain if the poor classes will be affected as much as lower middle classes that do not own land.

[...] we can estimate that a doubling in food prices over 2000 levels might bring 30% or so of the global population below the level of minimal dietary energy requirements, and a quadrupling of food prices over 2000 levels might bring 60% or so of the global population into that situation.

Unless they un-peg their currencies from the dollar ;-)

Well I hope that some people like that looney fella Khosla take a look at this.

Well I hope that some people like that looney fella Khosla take a look at this.

If people like Khosla look at this, it will validate their decision -that biofuels will scale and they will continue to get their subsidy and higher energy prices will mean profits.

What they don't pay attention to (and possibly don't care about) is the fact that we have an aggregate energy gain for society: say 8:1 on 50 quads, for a total of 400 quads globally. Therefore, any sub 8:1 EROI, even if it makes wild profits, is being subsidized by the remaining cheap high EROI fuels embedded in the infrastructure. So its a Tragedy of the Investing Commons; entrepreneurs can still make money while the planetary condition: human, critter, and ecosystem, deteriorates.

At least they'll know they are evil people. And so will we and the starving mob demanding heads.

Another way this could end is via the "starving mob" effect.

The income inequality in U.S.A. is also very large and even though food is a small percentage of income, what does that matter if you have a rapidly shrinking supply of discretionary $ because your housing costs are fixed, health care costs are rising, energy costs are rising and then food costs go through the roof?

Then consider the potential geopolitical impact of starving mobs in neighboring nations, trading nations, etc.

Well, for once I pretty much agreee with you. However, I think the impact is likely to be greater in countries like the US where most people are not used to making do - or less than making do.

Although it wasn't Stuart's intent, I think this article blosters the doomer case for a farmstead lifestyle. Right now I'm snowed in and probably will be for a few more days. We lost power, phone and (gasp) the internet. Has it been a big deal? Not really. We have our PV system and a back-up generator. We heat with wood and not only have water from our well but from storage taks. We store lots of food, etc. Coversely, my BIL in Carmel, CA still doesn't have power back, lost his water supply when the water company lost power (although the water is back now) and can't cook anything.

I truly believe people need to take some time to seriously look at how vulnerable they are to what may be coming.


PS I really believe a good starting point is to read Flight From the City by ralph Borsodi. It was first published in 1933. I have a 1972 reprint of it. It isn't a "how to" book but rather a "how his family did it" along with their ratiinales for their decisions.

Hello Todd,

I did a quick google for Flight From the City and found it online here:

Flight From the City

Thanks for the tip, it's on my reading list now. :)

I used to think that once subsidies would go away, agro-fuels would simple get out of business for their very low EROEI would make uncompetitive against other liquid energy vectors. But as this post shows the demand for agro-fuels will still be there (very low elasticity) and in the end agro-fuels will compete mainly against food.

Does it show that? Surely, if corn ethanol has an EROEI of less than one (as Pimental claims), and the source fuels (coal, oil and natural gas) and the end fuel (corn ethanol) are reasonably substitutable in the larger economy, only subsidies could possibly make corn ethanol profitable in the long term. I believe there are non-ethanol specific subsidies to farmers which contribute to ethanol's current commercial viability, not just the subsidies Stuart considers in this brilliant post.

Stuart, thank you for the superb analysis, and the enormously valuable data. Since I'm working on long term food security issues, you've just saved me a huge chunk of work, and I'm appropriately grateful ;-).

Ethanol also works to draw down future food production, and by several analyses has a greater net warming impact on the planet than burning oil. Because ethanol creates enormous incentives for environmentally destructive practices like continuous corn, heavy pesticide use and aquifer depletion, the potential outcomes are probably even worse than you state - that is, not only do we reduce our short term food security, but our long term capacity to keep producing food is dramatically cut into as we use fossil water and desertify arable land, not to mention reducing soil capacity to hold carbon by further warming the planet.

And worse than that...yikes.

Again, this analysis was brilliant and much appreciated.

Sharon Astyk

Gratz - you made Whatreallyhappened.com

top notch work. thanks for u'r followup on this all important issue!!!

this will take pressure from outside the US to reconsider our policy - let's hope not lethal pressure.
we are creating one helluva pressure cooker & if the decline of oil is significant i can't see an ok conclusion. we will need terrific leadership! i get a little hope that obama has a 3rd world perspective that could come thru as president.

thanks again

Infectious agents growth occurs until it runs out of things to infect, either because everything is infected already or because the uninfected become resistant or immune. The growth of ethanol plants is really the spread of an idea -- one of making money. Something which will stop the spread of that idea is a counter idea -- people losing money.

There are barriers to the continued growth of ethanol that you have not addressed. In particular, there is a transportation bottleneck out of the ethanol plant. Ethanol cannot be easily transported in its pure form, as it really likes water. Most of petroleum transport occurs via pipeline, so moving a lot of ethanol around is a problem. Second, there is the final bottleneck to the consumer: autos which can use E85 (and pumps to deliver it) are not in place and won't be in any large number for quite awhile. Given the mandates to use more ethanol, how this dynamic plays out with regards to the infrastructure problems is hard to predict.

But E10 shouldn't be a problem. Transportation is in fact an issue and adds even more to the energy investment side of the equation.

E10 use is economically linked to gasoline. If prices rise high enough such that consumption is reduced, then E10 use goes down accordingly. But I agree that the biggest problem now is transport out of the plant.

FELM--Food Export Land Model

Russia raises grain export duties to 40%
07 Jan 2008

Russia will introduce a 40% export duty on wheat, meslin (wheat and rye mixed), and barley. This duty will take effect from January 29, 2008 and will apply until April 30, 2008.

The government’s decision to introduce grain export duties and carry out so-called “grain interventions” (selling grain from the state intervention fund) was prompted by increased prices for bread products. Any country cares about its food security, keeping the balance between production and consumption,” he stressed. Grain prices are high both in Russian and foreign markets, which “leads to an unjustifiable increase in exports,” Agriculture Minister Alexei Gordeyev said.

This is breathtakingly excellent work. The elasticity numbers for driving and eating give a pretty good glimpse into the future, IMO.

I'd like to add one thing regarding future income disparities between the rich and poor. In Energy Intensity and GDP in 2050 I project that due to the rise in third world populations, the general drop in national GDPs due to energy decline, and the relative lack of improvement in the energy intensity of third world economies, the number of poor (those living in countries with an average per capita GDP under $3,000 per year) could balloon from 1 billion today to 5 billion by 2050, while the mean income within that group drops from about $2000 to $1200.

The implications of such an income change in the presence of biofuel use by the rich is doubly ominous. I fail to see how the third world could experience such a convergence without a massive human tragedy.

This is a useful analysis. I think though that there is sufficient flexibility in the food supply that the starvation you are worried about can be averted for long enough for policy to rationalize. A drastic reduction in animal protien consumption can maintain dietary inputs. I've noticed that the prices of organic milk and eggs have held steady as the price of the non-organic products rise to meet them. Also, my local butcher is now competitive with Safeway. I noticed also that the cattlemen's association opposed the energy bill. I think that the sqeeze can be placed on the middle class rather than the poor by driving the feedlot industry out of business through competition with free range meat, eggs and milk which often use non-arable land. A wrinkle to this is that ethanol plants are being planned as can be seen in the ethanol plant blight spread down into Texas and Arizona where corn is not grown:

Placing the cost of ethanol on those who consume it through a large increase in the price of animal protien may be something the market can manage. This would be worth investigating further. Could we be seeing the end of McDonalds?


As Stuart has pointed out, both oil and cereals are global commodities. While there might be "sufficient flexibility in the food supply" of the United States or other OECD countries, here are a couple of facts that suggest this situation is not universal:

Africa gets only 10% of its food calories from meat.
Africa imports 25% of its food calories.
Africa has less than 10% the per capita GDP of the OECD.

To me, that situation doesn't spell "flexibility", it spells "calamity".

I'd agree with you except that it is hard to get blood from a stone. This is why so much effort is put into getting the middle class to act against its economic self-interest. That is where the money is. Even debt vultures are really out to fleece donor countries rather than the bankrupt counties they initially victimize. I suspect that food aid will continue to flow for several more years and it will be our sacred cows that get gored, moving public policy away from biofuels. $15/chicken will get people's attention I think.


I see two problems with your argument. Firstly, the price elasticity of meat is lower in rich countries than the price elasticity of grain in poor countries:

What this implies is that meat consumption in rich countries will go down less (percentage-wise) than grain consumption in poor countries. Secondly, the price of meat won't rise as much percentage-wise as the price of grain, since grain is only one input to meat production (albeit an important one).

That said, I think meat price increases in developed countries are likely to get politically explosive.

On the other hand, it does not take a big reduction in meat consumption to free up quite a lot of grain, and elasticity in countries affected by famine is set close to zero owing to foreign aid. That effect might change but the geopolitcal opportunities for say, China, to step in seem too large right now for it to disappear quickly.


Hi Stuart,

Thanks for a great post. In a wonderful way, you give the dimensions of the competition that we are beginning to see between joules for food and joules for transportation. This competition is not new. Before the 1900's transportation meant horses. Horses eat a lot more than people, and there was competition at every stage. Should this field be planted for wheat or used as pasture? Should a railroad car be filled with food or hay?


This seems to underline a certain TOD editor's perspective - we will burn everything to try to keep things rolling.

What struck me reading this is how casually the debate about changing America's driving habits was dismissed.

Now having proved to your own satisfaction that unless Americans reduce their driving, involving dramatic changes to how Americans live, changes which have been put off for my entire adult life, maybe we should be discussing how much suburbia is worth in terms of human lives. Business as usual will literally mean killing millions, just to be able to keep the wheels within American suburbia rolling.

Pretty shocking results, regardless. Normally, megadeaths have been pretty much restricted to nuclear war and epidemic scenarios - thinking about burning the world's food for fun and profit is grim. And for those that bow at the altar of a free market, simply a logical extension of how the market will solve our problems - including too many poor people, it seems.

A 15 gallon fuel tank of ethanol is thus 7 months worth of corn calories for one person.

Thus, each refill of a gas tank with E85 equals the death of at least one person from starvation. Imagine having to look at a picture of a starving child with bloated belly, dying in his/her mother's arms, every time you pulled up to a gas pump. . . with the reminder that by filling your tank, you are ultimately killing this child.

It would put a different perspective on things, wouldn't it.

Unfortunately, there will be plenty of people that don't give a damn, including some on this board. I would just point out though, that there is a basic difference between seeing bad things over which one has no control happen to innocent people, and causing those bad things to happen by one's own actions. In the first case, one is just a passive, helpless observer; in the second case, one is what we commonly call a criminal.

Not wanting to see a criminal in the mirror every morning, it is time for me to get serious about making some BIG lifestyle changes.

"Unfortunately, there will be plenty of people that don't give a damn, including some on this board. I would just point out though, that there is a basic difference between seeing bad things over which one has no control happen to innocent people, and causing those bad things to happen by one's own actions."

Uhhh... so let me get this straight: you see filling up one's tank with E85 as morally equivalent to murder because some overpopulated, resource-poor third world country has failed to embrace birth control and take positive steps to educate and care for its own people? Mmmkay...

Actually, I do "give a damn" about poverty and starvation. I just don't agree with your interpretation of the cause (my buying gas for basic transportation) or solution (my switching to regular gas or some other 'morally superior' form of NRG).

I am no big fan of ethanol and agree with most TODers that it's a dead-end in the NRG big picture. Even so, I just don't buy the "living as a Westerner = murder" moralist argument. We could all try going back to a pre-mechanized, subsistence farming lifestyle ( I say "try" because at current U.S. population level, it's not going to happen). We could even attempt to re-distribute most of U.S. food production around the world. Even assuming all this this were practically & politically feasible, what good would it do as long as the rest of the world keeps adding another 80 million extra hungry mouths to the planet each year?

There can be no solution to the world's hunger problem without addressing the root cause: population overshoot.

I don't buy the "living as a Westerner = murder" idea either. However, what we are talking about here is a radical disequilibrium: a deliberate decision to divert a massive percentage of the world's food supplies, knowing full well the disasterous consequences -- all done to keep the ICE private passenger automobile running, and with a cavalier dismissal of alternatives (like much higher CAFE standards, fast track development of EVs, Alan Drakes EOT). This goes quite a ways beyond the mere fact of differential levels of development and wealth.

We (or actually TPTB, those in positions of political power and those with economic power in symbiotic relation with them - ordinary folks like me have no significant input or influence) have a choice. We COULD pursue a pathway toward an energy efficient future built around renewables. The TPTB have decided to reject that future, and to instead pursue a last ditch, no holds barred, desparate gamble to extend BAU and their own advantageous position in it for as long as possible, with no regard to the consequences for anyone else. This is no "tragic mistake", nor something done in ignorance - they know very well what they are doing.

The average Joe or Jill Sixpack filling up at the gas station probably DOESN'T know the consequences of his actions, however. They certainly haven't been told. Thus, I don't really blame them. But how would you tell them? This was the point of my previous post. They are not going to read an article like Stuart's masterful as it may be. Having been thoroughly conditioned by visual advertising, however, a powerful visual just might break through and expose them to the reality of the situation.

Actually, I'd go you one further. I'd guess that even if Joe or Jill Sixpack *did* understand the global consequences of filling up their SUV with E85, I doubt they'd much care. However, I agree that we *could* and *should* be doing far more than we are now.

But here's the rub: the average consumer does not respond well to teary-eyed appeals from Sally Struthers and sad looking Africans. Let's face it --most people are basically selfish. It seems to be hard-wired into our DNA. However, consumers *do* respond to price signals sent at the pump, and until very recently, those price signals all said "consume away, there's plenty more where that came from!" Once regular petrol reaches a critical threshold (say $10 USD/gal.), we can actually expect this situation to get *worse* not better, as ethanol and other/better bio-fuels start to become even more profitable.

Of course, we could be spending the hundreds of billions we've wasted on Iraq and tax-cuts for the rich on promoting birth control & women's literacy around the globe, or developing alternative energy sources. But The Decider has decided that this is not a priority. And the leaders of dozens of other third-world countries aren't doing squat about population overshoot either, or, in some cases, are actively suppressing/subverting family planning efforts. For some, it's primarily due to religious beliefs, for others it's due to some combination of ignorance, fear or greed.

So, either we --and other world leaders-- acknowledge reality and "get with the program" in a big hurry, or we let the status quo continue and the world will "solve" our long-term problems for us... just not in a nice way. I wish I had some other plausible solution that did not involve mass starvation, war and misery for the vast majority of the world's population, but unfortunately I don't.

WNC Observer,

A quibble: I do not think that providing fuel for cars is the major political purpose of corn ethanol in the United States. I think making the grain farmer lobby happy is the biggest purpose with the car usage a rationalization.

Btw, Anyone interested in what population overshoot + dwindling natural resources + ignorant, backward population adds up to, here you go:


Oh, but we're different! We're special! Or at least all the cornucopians will tell you that we are, without one shred of real evidence other than their wishful thinking.

I never said "we're different" --at least not genetically/biologically. Americans and all Westerners are fortunate to have been born into societies with abundant (but finite) natural resources, universal literacy, and relatively stable, quasi-democratic governments (though slowly migrating towards plutocratic rule in the U.S.). None of this changes the fact that we will also be impacted by Peak Oil, though unlike Kenya or most other third-world nations, technologically advanced nations DO have the resources to deal with it --*if* we get moving right away.

My apologies, HARM. I was being facetious because many of the cornucopian responses you will get around here to population (as the elephant in the room) are basically what I posted - we're different, this time it's different, we're going to turn this around, etc.

I agree that so long as population remains off limits for discussion, then any attempted solution is trying to fix a symptom and not the underlying problem.

NP --I think we're basically on the same page.

Some similar thoughts were crossing my mind.

I think this is a very thorough analysis, but in order to get any realistic policies implemented, the policy makers, who to some extent depend on voters to get in office, need permission from said voters. The problem is that the voting public isn't generally aware of the limitations of ethanol or any other biofuels, and unfortunately this analysis isn't going to change that. That's not a criticism of the essay, the details need to be available to back up the conslusions, but to get John Q. Public on board you need to be armed with a simpler message to lead with. What I've had the most success with is using calories (nutritional, actually kcal) as the energy unit because it is accessible to most people, and pointing out that the average American burns ~45000 Calories in gasoline per day, while consuming 2000 in food. So, are we just going to increase food production 20x? To be fair, no-one I've talked to is lining up to form an eco-village with me, but I've at least managed to get a few people thinking.

What can one say to Jeremiah the Prophet? This was one of the greatest gloomiest messages ever. Honestly, we need to get our politicians to read this. (Jeremiah's message got to the king too, but the king burned it in the fire after they read it to him - Jer 36:16-26)

I'm concerned that the first world is going to be able pay for ethanol and the third world/poor are not going to be able to pay for food.

Of course, no thinking person believes corn alcohol is a lasting contribution to America's fuels supply problem. At best it is a transition to cellulosic alcohol. So your dismissal of cellulosic alcohol draws my particular concern.

I'm a having some trouble following the reasoning that rejects cellulosic alcohol. Cellulosic does indeed have technical problems, but if those are solved, it will have a different cost structure than corn alcohol. In particular, it will probably always greater processing cost, but it will also have lower cost input materials (else why bother?). It will surely have different inputs, so there will be arbitraging of a wider array of input materials, not just corn and oil. Perhaps there is some 'wriggle room' in the cellulosic path.

A different path entirely would be to add to the mix biodiesel from palm oil or some other plant source, or algae. These surely have their own cost structures that have nothing to do with detailed analysis of corn cost. I particularly like consideration of algae biofuels because algae is a very 'industrial' process and can be done without competing with food production agricultural land.

My personal belief is that whatever finally works as a substitute for oil/petrol will be working in an economy that is so different from the current one that this kind of analysis will seem quaint -- historically interesting but quaint, and requiring lots of explanatory footnotes about how weird things were 'back then'.

The issue is this. Let's say in two years, the first plant comes on stream. Say it's a 3kbd plant. Let's say it does fantastically well, and the industry starts off growing at a very high growth rate. Hell, let's say it has twice the growth of the food ethanol industry - 50% a year. So we have 4.5kbd in 2011, 6.75kbd in 2012, etc. By 2020 we are up to 172kbd. In the meantime, it's all over with food ethanol. Even if we grant you 100% CAGR, it take until 2019 to get past where the food based ethanol business is now. That's the problem - when you are starting from nothing, it take a while to build up any critical mass.

This does seem to be a place where some government regulation should forbid the use of food corn for fuel ethanol. Further, if the goal is an economic solution to US fuels supply problem, then government regulations should also decree that no proposed solution receive market distorting subsidies. But perhaps that is too much to expect.

Your paper seems to me to show that we cannot achieve a transition to non-oil civilization through a money economy. Do you have suggestions? I had hoped that corn ethanol would merely be a stupid investment with no practical effect while solutions were being found by other people working on other means, but you show it is much worse than that.

This is not that hard to fix if we as a society were to choose to do so. We would need to tax biofuel production instead of subsidizing it (with the tax rate roughly targeted at having some kind of slow seemly growth in biofuel production, instead of a ravaging 25%/year metastization process). I think the concern is the relatively slow pace at which the body politic understands issues and then figures out the best course of action (after first trying a few lousy courses of action) versus the speed of a 25%/year growth process.

I would guess that when/if famine appears, the Congress will drop the ethanol subsidy like a hot potato. At that point there will be so much momentum in the system, that this by itself might not change things much, but I suppose it will enable Congress to say that they "did something".

But will celluosic SUBSTITUTE for corn, or will it just end up being an ADDITION to the base that corn will have already established?

It looks like Switchgrass will make the grade:

A big problem with switchgrass is that while it is a long lived perennial plant, it takes a couple years to establish. First, what farmer is going to forgo productive grain crops while waiting for a harvest of switch grass? You also lose the possibility of multiple crops in rotation. Second, who is going to take the risk of planting switch grass when it will take awhile for the market for switchgrass and processing plants to gear up? It was easy for corn processing ethanol plants to be built because the corn was already being produced.

But will celluosic SUBSTITUTE for corn, or will it just end up being an ADDITION to the base that corn will have already established?

As long as the fuel-food arbitrage is allowed to continue without some kind of taxation regulation of biofuels, food-based biofuels will continue to be part of the market. In fact, unless cellulosic ethanol turns out to be significantly cheaper/more efficient to produce than food-based the head start that food-based ethanol has will not be overcome ever.

Congratulations Stuart. This is excellent work.

My question is what mitigating factors the DDGS waste stream has on this analysis for food production. Certainly the caloric content of DDGS is lower than the original corn because the starch has been removed, but could the DDGS act to stave off worldwide starvation, and if so, how?

What would the effect of the DDGS waste stream look like in your petri dish model? Obviously, the conversion of all corn to ethanol will result in a huge amount, which should depress the price of this feed substantially, and that may have the effect of lowering the cost of meat with respect to cereals.

Fascinating analysis though on a very important subject.

You can feed livestock a limited amount of distillers grains depending on the animal and maybe you could slip it into peoples food for extra protein. Those plants in California and Arizona and probably the ones in Texas are there because there are feedlots where corn and is being shipped and distillers grains can be sold.

The only way that biofuel will actually provide fuel for the US on other than a boutique level is if it can be do with only biofuel inputs, no diesel, no gasoline, no pesticides made from fossil fuels, no equipment made by other machines made by fossil fuels.

Until that point, all you see with biofuels is an added user of fossil fuel, namely the ethanol industry. You are burning one unit of fossil fuel to get .98 units of ethanol, a moronic concept at best.

Sure farmers and ag companies are getting rich thanks to subsidies. We could run the world on ethanol derived from saffron if we threw enough money at it.

While I acknowledge your rather voluminous work as being rather voluminous, the actual physical viability has already been researched quite well and found to be lacking. All other considerations are economists pissing in the wind.

In other words, the science has existed about the problems with biofuels. So this issue was born as, and continues to be, a political problem. Any suggestions?

Anybody have an inside connection with Oprah? That's only half a joke. She might actually care, and her endorsement of Obama seems to have had an effect. (Along with Obama's attacks on Hillary's voting record against ethanol.) If farm-state Obama's going to be the nominee thanks to farm state Iowa, he's the one who needs to be shown the light.

I think it's more likely that this problem will be politically resolved when food prices get high enough, and not until then.

When did people stop investing in stupid ideas? I must have been out of town when that happened.

Sure the cognoscenti all know that the very idea of crop-based biofuels is dumb, but the majority of the people fall into two other categories: the uninformed and the investors. AKA sheep and shepherds. The shepherds control the news that goes out to the sheep just well enough to keep them all thinking that black is white.

I have no doubt whatsoever that global ethanol production is going to climb much further up our sigmoids before the wheels fall off. The shepherds will just have their newscasters trot out someone from the AEI to tell the sheep that it's the Africans' own fault they're starving to death, that all they really need is a good structural adjustment program to straighten out their economic priorities. And the ethanol IPOs will keep on rolling.

People make decisions on how to work or invest based on whether they get paid money for doing that thing, not based on how much energy it does or doesn't supply. Thus if an activity is profitable in money terms, it will tend to occur, even if it isn't very profitable in energy terms. In this case, the poor energetics have not prevented the biofuel industry from growing rapidly, and I do not anticipate they will in the future either, since biofuels can arbitrage coal to liquid fuels much faster than a CTL industry can ramp up.

Staurt , I think I speak for most people here. You Rock!

Great piece of work SS! This sheds some more light on the diffuse food vs. fuel theme. Posts like this have made me a daily TOD reader for the last two years.

I think one of the real issues how do we get the word out on this issue. There aren't many newspaper writers who are willing to read a nearly 8,000 word post, no matter how good it is.

Perhaps we should be thinking about doing a Press Release on corn-based ethanol. We could include a quotes from Nate on the water problems and some from you on the food supply issues.

Really, the issue is bigger than just sending out a press release. There needs to be a documentary movie about how bad ethanol is, distributed through churches and schools, and hopefully aired by TV stations as well. This would take a lot of work and funding.

This would take a lot of work and funding.

And funding, for the most part, comes from people that have made money via the current system, and would be reluctant to fund research and action that might lead to fundamental changes in this (to them, successful) system. Yes we have a proximal energy/food problem, but ultimately we have a social/political problem.

This fact is further complicated by the following conundrum. If everyone in North America, or the world for that matter, understood the implications of Stuarts analysis, and also was able to synthesize the myriad connected analyses on this site, would that be a good thing or a bad thing? Would 'democracy' work if 6.7 billion people read and understood theoildrum?

Right. Ask the criminals to help you prove the criminal case against them? It ain't gonna happen.

There are a variety of groups and interests opposed to the ethanol mandate. Self-styled libertarian 'free market' types oppose this type of mandate on principle. Industrial meat producers and food processors compete with the ethanol crowd for feedstock. Environmental groups are waking up to the issue of corn-based ethanol.

I don't think that a good research proposal need go begging for long.

Perhaps someone should respond to James Woolsey's satirical outlook piece in the Washington Post today that basically touts corn ethanol as "reasonable fuel source with a few warts".


Or maybe we need to just print up stickers that say "Biofuels Kill Billions" and slap them on every gas pump that we can get away with.

Maybe there should be a summary of important findings and recomendations at the beginning of the article. The lesson I drew was that the US can meet some percent of fuel use with ethanol without affecting exports much (maybe a around 5% of current consumption, especially if you can use corn cobs too) but other countries could potentially make ethanol with those exports and US policy makers couldn't prevent that. I think a lot of people assume the US market will get saturated and discourage more investment because ethanol is an imperfect substitute but that might not be the case. The policy lesson I see here is that requiring vehicles to be flex fuel may be a bad idea unless and until cellulosic is proven viable. U.S. auto manufacturers are committed to producing half of their vehicles as flex fuel. It also seems that if the situation is as bad as this analysis would suggest the only way that this is going to be prevented is to develop something better.

I don't think the situation would get as out of hand as many here seem to think though. I wonder if it would be profitable to make ethanol with grain imports. It would only happen if it prices for oil were high enough or public policy was supportive (look at how much policy it has taken to create Brazilian and U.S. ethanol industries). I would think that there would be a lot of oil demand destruction if oil prices were a lot higher and if food prices were high it's hard to imagine that it would be politically feasible to start this kind of program, or maybe even to continue it.

I would also think that financial problems caused by high oil prices would cause credit to seize up and it would be harder to finance construction of new plants. If investors put money into commodities to protect their wealth it might drive up oil but it also might drive up feedstock cost, discouraging production.

The first problem, that of how to make and fund a quality yet controversial documentary, would be addressed by talking to people who worked on documentaries and video essays such as:

official movie website
Mostly just video and audio clips with voiceover. An attempt is made to avoid the problem of copyright with Fair Use regulations.

Money As Debt
official website
This looked cheap as hell to produce, yet tells the story effectively enough.

The Corporation
official website

What A Way To Go: Life At The End Of Empire
official website

End Of Suburbia
official website

Crude Awakening
official website

I'm sure that Michael Moore and Naomi Klein would have some insight on media activism as well. There's also a well-known Bohemian Grove conspiracy nut who gets a fair amount of attention, but since he thinks peak oil is a Zionist scam, I'll not even mention his name.

As to getting such a documentary aired ... BBC Horizons recently did specials on pandemic and global dimming. The Sundance Channel recently decided they would air Crude Awakening and End of Suburbia.

As to whether there is even enough time to get a documentary made, that's the 64,000 yergin question.

My 2c at getting the word out, which I agree is very important: I've been doing it on a couple of Economics blogs, those of Nouriel Roubini and Brad Setser.

As you will see from my posts (which come from "RealThink") you can logically branch to this issue from a number of topics.



Stuart: Please accept my congratulations and appreciation on what is a superlative article.

A few modest thoughts:

1) This should provide final, incontrovertable proof that our entire political class, including the entire crop of current Presidential candidates, are not merely clueless idiots, but are knowingly complicit in what can only be called a crime against humanity. Even that term hardly comes close to describing it. Hitler's "Final Solution" only knocked off six million; what do you call a plan that will inevitably lead to the deaths of nearly half of the entire global population?

2) I hope someone is maintaining an archive in several secure locations, and that this paper will go into it. We will need a comprehensive set of evidence for the Crimes Against Humanity trials that I hope will someday bring to justice those responsible for the megadeaths of billions in the name of business as usual and continued corporate profits.

3) I was thinking in terms of a replacement car that could run on diesel, and eventually biodiesel. Forget it. My plans must now evidently be revised to live without any liquid automotive fuels, and the sooner the better. Anything else makes me complicit in these crimes.

4) Food is going to get very expensive very quickly. I had been uncertain whether to prioritize my limited resources on ramping up my own food production or investing in further residential energy conservation. Thanks for helping me to make up my mind. Important as energy conservation might be, I now have confirmation that food production has to be the immediate top priority.

"We will need a comprehensive set of evidence for the Crimes Against Humanity trials ... "

Stuart's study presents a very scary picture, but I wonder if laying blame on a bunch on loosers is a useful response. If his analysis is valid, there is a very real possibility of massive fall in world population, but is the a crime against humanity? Well maybe yes, but is it useful to prosecute? Shouldn't we better be thinking about ways to mitigate? By the time we get through this, all the guilty ones will have died, or become too senile with age to stand trial.

intent."but are knowingly complicit in what can only be called a crime against humanity".

I just hasten to disassociate myself from this perspective. For it to be a crime, one needs criminal intent. I do not think most of the people advocating biofuels believe it will cause harm. Furthermore, it's not a crime to use one's own property in one's own best interest within the law. In the parable of the Good Samaritan, the priest and Levite who left the injured man on the side of the road may have been callous, but they weren't criminals in the legal system of their day (or ours now).

A tragedy of unimaginable proportions - it could be if things keep going on the current trend. A stupendous moral failure - perhaps, though right now it looks more like a bad judgement call in a world that is getting harder and harder to manage. A crime - I don't see that.


You are a fine gentleman and a scholar, and obviously are very kind hearted and generous when it comes to extending the benefit of the doubt to others. All of which I greatly respect.

I wish I could share your attitude toward those in positions of authority and wealth wrt their intentions. However, given the vast amounts of profit that stand to be reaped at the cost of unprecedented human suffering and mortality, I confess to having a rather hard time being quite so generous in extending the benefit of the doubt to these people. In any case, I do believe it is quite clear that their intentions toward those who are most poor and dependent upon secure food supplies are anything but benevolent. The conscious intention may not be to starve billions to death per se, but an intention to maintain an affluent way of life and pursue profits with no regard for the consequences to others is clearly evident. There is such a thing as criminal negligence, and a callous disregard for the consequences of one's actions is usually considered to be strong evidence of guilt.

Uh excellent post Stuart ... um I mean I think, yea wonderful, wonderful post. Sorry.

from Dec 17th


WNC, I suspect most of those involved with ethanol production feel they are helping save the environment and transition economies to renewable energy. Whether PsTB have planned differently I don't know, but I don't see that putting Willie Nelson on trial for crimes against humanity really helps anyone.

"Do not be so quick to deal in death and judgment ... it was pity that stayed Bilbo's hand."

For once, I have to disagree with Stuart. If the corn ethanol industry is allowed to develop to the extent he projects in the next few years, it will be a crime against humanity. While its promoters certainly don't intend mass starvation, it won't be long before the evidence that it is coming would be plain to all. At that point, proceeding with developing the industry in the face of that evidence would be tantamount to pulling the trigger oneself.

There are counter-forces, however, that will be in operation. A doubling of US food prices would create a massive number of angry people, who would form a receptive constituency for the much larger cries of pain coming from the Third World.

Further, political intervention will happen before serious inroads are made into food production outside the US. It needs to be realised that people in the rest of the world don't have as strong an attachment to the "free market" that the US does. See the following story from South Africa:


"Food security is not just a rational but also an emotional issue. With the ANC party conference in mid-December and a general election in 2009, the government was not taking any chances on being seen as insensitive to food security," he explained.

Farm lobbies in Europe & South America will be shouted down with outrage if they try to get in the road of a "food security" push from Africa & Asia. Just think how people in the rest of the world will react if they're told "Everyone will have to pay much more for their food and the poorest 25% will (unfortunately) have to starve, just so that Americans can keep driving in the manner to which they've become accustomed". A hint:

Recent pasta protests in Italy, tortilla rallies in Mexico and onion demonstrations in India are just the start of the social instability to come unless there is a fundamental shift to boost production of staple foods, Joachim von Braun, the head of the International Food Policy Research Institute, warned in an interview with the Guardian.

The growing appetite of China and other fast-developing nations has combined with the expansion of biofuel programmes in the United States and Europe to transform the global food situation.

From: http://www.guardian.co.uk/china/story/0,,2221372,00.html

The result of this, therefore, would be to remove the option of imports and force the sigmoid curve to operate within the US virtually alone. In these circumstances, I think there would be a change of direction. People will, at last, realise that food is more important than petrol.

Stuart: Great article. You should be writing books.

really? would books be read by more civicly minded, thinking, acting people? I can't even get most of my friends to read through an entire oildrum posting let alone a book.

Even and especially the 'cognoscenti' in developed nations, have had their brains exposed to stimuli like email, the internet, soundbites, and a general culture of addiction. This has served to steepen already steep discount rates, and further made us perpetually feel like 'if only I had more time'... On top of that, we have SO much information available that I personally (while maintaining some small capacity to read a book), have hundreds lying around partially read.

I did read this post though. It was quite good. If Stuart writes a book, I will certainly buy it, (and ask for his autograph), but after my mind attempts to pickup 80% of the content by skimming the graphics, like a vacuum cleaner, it will join the rest of the stack...(except Sci-fi and fantasy novels of high quality, I still manage to finish those)


One book you should real all the way through is George Monbiot's Heat. It does a very thorough job and while it can be critisized for relying too much on natural gas, one can see a complete path laid out that retains most aspects of modern society. In all, it makes the case for the technical fix that is very difficult to counter on, say, doomer grounds. Just pretend it is vintage science fiction until you are done and you should be through it in a week.


It was on my list, but my TOD friend Yoon said half was great and half was crap, and as he is smarter than me, I didn't want to be reading it not knowing which was which....;)

I haven't read "Heat", but in his Guardian columns Monbiot is on the ball with most of his analysis.

So I'm guessing its his solutions which aren't so hot.

WNC Observer,

It is my understanding that Fred Thompson and John McCain have both taken critical positions toward corn ethanol. Can anyone confirm or deny this?

Saint Hillary used to be rationally opposed. But she flipped. Obama likes corn ethanol and Illinois coal.

Fantastic work Stuart, really. Let’s see, you’ve shown that the biofuel industry, with its stakeholders operating rationally in the free market have the potential to rapidly grab a significant proportion of global food production, starving many in the process, in order to deliver relatively minor volumes of liquid fuels.

We seem to already be on this trajectory so what can stop it? What happens when people start to die in significant numbers, 50 million in 2011, 80 million in 2012 for example? I would hope any country which was suffering significant starvation due to the free market’s embrace of biofuels would draw a line politically. Would close any indigenous biofuel plants, ban the export of agricultural products and minimise non-food agriculture (coffee, tea etc.). If this action was imposed country by country as starvation started to be a problem significant amounts of food would be politically removed from the potential biofuel market and we would be left with biofuels only being produced in counties with surplus agricultural capacity and the population of other countries reducing to what their indigenous agricultural capacity can support.

The other, and less devastating, outcome would be a degree of global compassion. The first year of significantly increased starvation – attributable to high prices – in turn attributable to increased biofuel production would bring about the politically imposed closure of biofuel plants. It becomes internationally unacceptable for the US, for example, to produce biofuels which can be directly linked with the starvation of millions.

There aren’t many precedents for such global compassion. All I can think of is the nuclear non-proliferation treaty. Could we see a similar non-proliferation of biofuels treaty? Stuart’s suggests there is justification for one!

I can foresee a dramatic rise in "direct actions" against biofuel plants in both affected countries and other nations involved in the biofuel trade. There could also be a UN convention like CITES to give the international concerns some legitimacy and provide a foundation for sanctions.

I went to a biofuels conference in Maryland last May and at the environmental breakout session there were some draft sustainability certifications being discussed. The main issue driving this was that European demand for biodiesel was causing palm oil plantations to emit more carbon dioxide from rotting peat than the diesel that was being replaced. The EU plans on putting restictions on tax benefits for unsustainably produced fuel. We'll seen how these efforts go.


You don't need biodiesel demand for problems with palm oil. Palm oil is extensively used to base luxury foodstuffs and cosmetics on by companies such as Nestle and Unilever. Economic growth in Asia leads to a bigger demand for luxury foodstuffs and cosmetics hance more pressure on the palm oil markte. Historically vegetable oil cracking and vegetable oil refining were the province of a few vertically integrated food concerns forming a market oligopoly. This oligopoly has recently been broken by former 3rd world business interests aquiring much of the knowledge and market infastucture from the big agrcultural concerns. These new investors, mainly from established palmoil producing countries such as Malaysia have strated to expand their business in other countries and other areas of the world. Biodiesel is yet another cause for growth in palm oil acreage but it is by no means the only one. I'm also a bit sceptical about the role former oligopolist Unilever is playing in the european lobby against biodiesel.

Some of the effectc of all this in Bornea can be found at
http://borneoproject.org/article.php?id=100 and
An overview of the effects of biodiesel expansion in Colombia can be found at http://americas.irc-online.org/am/3962


From Aginsight 4 Jan 2008

Market watch

Central Ill Corn Bu. Jan 2007 $3.40 Jan 2008 $4.37
Omaha Ne Corn Bu Jan 2007 $3.27 Jan 2008 $4.49

Ethanol per Gal. Jan 2007 $2.33 Jan 2008 $2.26
Today’s close on CBOT futures $2.14

If the corn to ethanol price ratio remains constant that is about a 7 Billion dollar reduction in profits for the Ethanol Industry.

Interesting. You could also estimate the human starvation resulting from the transition of human food aid to biofuel in this region by including an estimate of population growth, using an present day estimate of food aid (USAID) and it's value. It seems that the dollar amount will remain fixed or decrease for food aid while the cost of the food will considerably increase. Wow, great job.

Nice! I'll try to remember to compute the cost model based on the futures prices tonight. It could well be that the corn ethanol industry in the US is due for a temporary setback, especially if a coming recession drops oil prices. But I would expect growth to resume once oil prices go higher, and as more acreage gets devoted to corn. And the rest of the world has a lot of "catching up" to do.

I"m wrong 7 billion in gallons but only 2.8 in bushels. so it is closer to $3 billion in profit loss.

Someone mentioned Taleb of Black Swan fame yesterday. what would he think? He'd laugh at everyone in 2008 preparing for some event in 2020 and projecting oil production and the effect of peak oil in 2050. He'd probably laugh and buy deep out of the money oil puts and calls.

One mitigating note: the first posting of a long time oilrum reader :-)

The above article and comments are high valuable work and do highlight a possible serous problem.

But I don not share the gloomy view on the food supply. The gloom will rather set on ethanol investors getting burnt like in the dot.com bubble.

The above considerations - especially about price elasticity for agsoline and food demand - miss out a few points:

i) Retail food - the one we actually buy - costs (und values) far more than the present (historically low price) of the cereal commodities used to make it (even discounting 50% margin).
Just think of beer, breakfast cereals, bread, cookies - and good salad oil ... are you elastic on this? (I am not).

ii) Unless non-compliance penalties are very high, corn ethanol for gasoline will not make much way beyond $10 or rather $5 a gallon as other sources (cane ethanol from Brazil or chemical synthesis) will come into play .. since food is sooo much more profitable (in total revenue)... or (most probable) there will less ethanol added ($200 oil is $5 a gallon).

iii) The above comments rightly point to the untenable situation, that people in industrial nations burn 10-20 times more kJ for transportation than the eat .. yet they pay more for the food. For me, this indicates that a large factor must be added to price-consumption-flexibility chart, which should likely change the picture quite a bit.

People will have less money left for cars ... and discretionary travel.

Simply, I do not expect the beer taps (E05 fuel for humans:) in the bar to run dry before the gas station ...

iv) That fact, that ethanol plants have capacity tp process corn, does not insure, that they will be able to acquire that much corn at economically affordable prices.
Just remember the mining ghost towns across the globe ...

v) We should not forget, that until recently - when the present biofuel plans were drafted - prices of agricultural commodities were rock bottom.
Farmers are most probably much more concerned with another price collapse than mass starvation - and maybe see biofuels as a new hope ..

The assumption of free world market for food is even less realistic than for oil
- a very large part of the global food production especially in the much cited "poor countries" is not traded beyond local level. Government price and export/import controls, e.g. using tarifs are the norm.

-> High food prices WILL prompt political action. Policians in the US are maybe not aware of food <-> fuel problem after decades of surplus.

- the US run a very large trade deficit. Losing revenue from the export of ag products and processed food may also be a point... as is the low savings rate / margin of freely disposable income in the US ...

- And do you believe, that the Saudis and other OPEC states are just going to watch food import prices soar and petroleum revenue decline? I just do not have the numbers to calculate, how much of the farming and ethanol business in the US (and EU) they might take over, especially if the add up their dollars with the chinese ...

This does, however, not rule out, that countries with low per capita income in need of both food and oil/ore/coal imports, e.g. Bangla Desh, Pakistan, and some Carribean States as Haiti may run into very serious problems.
On the other hand, the Dakotas, Argentina and Brazil will have a bonanza :) .. and will not be the only ones to profit.

Pushing ag prices back to normal (historical!) levels should also help to contain urban sprawl as farmland becomes valuable again and stop land flight in the third world.

Just my 3 US-Cents (0.02 Euro).

I agree that food is going to be a big problem. But I think it will be a much bigger problem than you have shown due the probability of farmers returning to producing their own fuel when the cost of producing their own fuel/fertilizer is less than the cost of buying petroleum fuel/fertilizer. I know some farmers are already starting to make the switch and that trend will accelerate as the price of diesel fuel continues to climb. Below is something I have been working on for a while about this change, but it is far from a finished piece. I am still lacking solid figures on fuel consumption per acre for growing corn, soybeans and small grains – Fertilizer levels required for the same and hard info on acres per cow (or equivalent) for hay, pasture and fertilizer production. I would love to be able to develop a spread sheet where the prices of the various inputs could be changed to see just where the various cross over profitability points would be but I lack the computer skills (and some of the necessary input data) to make it happen. I would be more than happy to collaborate if there is anyone else that would be interested in this.

The following is an unfinished “work in progress”:

Export Land Model not just for Oil?

Agriculture is another field that ELM might be a good fit for.
As petroleum diesel becomes unaffordable or unobtainable for farmers they will not revert to horses and such. They will switch to biodiesel to run their farm equipment and supply heat for their house. But, biodiesel from the big producers will also cost too much and the truckers, railroads and others will be able to outbid the farmers for the commercial biodiesel. So most farmers will resort to making their own biodiesel on the farm. (Just like they used to raise their own feed for their horses in the “good old days?”) One problem that crops up is that soybeans from which commercial biodiesel is made are very hard to extract the oil from. The beans have to be steam heated to get the oil out. Products like rapeseed can be “cold pressed” to get the oil out and there are many small diesel powered screw presses to do this available on the market TODAY (the suppliers almost all warn customers not to try pressing soybeans cold). Also, you get more gallons of rapeseed oil per acre (about 100 US gallons) than gallons of soybean oil per acre (About 60-70 US gallons).
So the farmers will be reducing their row crop acreage by maybe ¼ to grow the rapeseed to make their own biodiesel to run their farms (power tractors, combines, skid steers, home heating, crop drying, etc…). Internal consumption reducing available exports?
Then we come to fertilizer. Petroleum based fertilizer will also become too expensive or hard to get. So to maintain productivity of their fields farmers will have to return to livestock manure. But to get the livestock manure they will have to diversify by going back to raising livestock. (Getting to sound a lot like the 40’ & 50’s farms isn’t it? ) To raise livestock farmers will have to cut back some more on row crop acres to provide Summer pasture and also fields to raise hay to feed the livestock in the Winter.
So, farmers will reduce their farm export grain acres to ½ or less of the acres presently available for growing grain to sell (export) off the farm.
If the production of corn were to drop by ½ the price of corn would at least double or perhaps triple or more. So if the farmer produces ½ the corn and gets twice or better the price, along with the reduced input from fuel and fertilizer costs plus the sale of livestock, it can be seen that the farmer will be making as much or more net income post peak oil as before.
And with a doubling or tripling of corn prices, corn based ethanol plants will very likely fail financially in a big way. I am glad I don’t have any money invested in them.
Because of the reduction in grain export acres the practice of cattle feed lots will decrease dramatically; which will affect how the big packinghouses operate. (If we can ever get the US Congress to change the laws so local meat markets can once again buy, butcher and sell locally produced animals to the local population it will affect the big packing companies even more – BUT, expect the packing companies to put up a BIG fight over this change).
As our increasing internal consumption of the decreasing production of food grains takes place within the USA, the amount of grain to export to other countries will decreaase very quickly. (Hint - how many instances of contaminated meat have you heard about from big Federally Inspected meat processors and how many from small local meat markets???? So who would YOU trust?)

China, India, etc… cannot even feed them selves now. With decreases in oil availability they will be in even worse shape. The US is still seen as being able to produce sizable amounts of export grain. If you were the folks in the Middle East, whom would you focus on selling your oil to when you consider large amounts of their grains have to come from imports? The US might be in a better position than many think?

Hope this will be of interest and help in your educational activities.

I have a new acronym: FELM--Food Export Land Model

I posted a note up the thread about Russia actively trying reduce food exports, because of domestic demand.

I think a good line of business to get into is setting up and running local biodiesel coops for farmers.

Jon: the USDA maintains detailed statistics on the cost structure of growing major US field crops. The data are accessible from this page. For example, here's the cost/revenue for corn in 2006 (when they made money with corn prices at $3.22/bushel, versus losing their shirts in 2005 at $1.74/bushel):

Looking at this, if I was a farmer, the news that corn prices were now going to be arbitraged to oil prices would be about the best thing I'd ever heard - healthy profits as far as the eye can see. I'd be jumping up and down screaming with glee; when my energy costs (which are only one moderate slice of my costs) go up, I know that my whole output revenue is going to go up by the same multiplier (possibly after some delay and with a lot of volatility).

This also puts paid to the whole relocalization-back-to-the-land idea (on any scale). You're never going to be able to afford to buy the land from industrial farmers who are making a killing growing biofuel feedstock. OTOH, I'm softening to the gardening thing - could be a good supplement to expensive food for people that have a bit of garden but not a large income.

In the January, 2007 Barron's Roundtable, Marc Faber had one key recommendation: buy farmland. It will be interesting to see what he has to say this year.

Link to cautionary article in Barron's about farmland. Faber was certainly right about farmland in 2007. The question is where does it go from here.


From Barron's last week:

Don't Bet the Farm

YOU'VE LIVED THROUGH THE TECH-STOCK BUBBLE. The dot-com bubble. The residential-real-estate bubble. Now, get ready for the cropland bubble. - At year-end 2007, farms -- the latest count shows that the U.S. has 2,089,790 -- are what Miami condos and San Diego McMansions were at year-end 2004: properties so hot that they're likely to have a meltdown in their future. As city slickers in many parts of the nation see the market prices of their homesteads deflate faster than a New Year's party balloon, farmers are watching the values of their land swell by annual double-digit percentages.

Don't Bet the Farm – Part II

The rush for ethanol is easily the biggest factor behind rising farm prices. And a glut of ethanol could develop quickly as more and more farmers try to get rich quick by switching production to corn. In fact, the glut may be here. In fact, the glut may be here. More than 130 ethanol plants now operate in the U.S., up from around 80 three years ago, while the number of gas stations selling ethanol is as underwhelming as the number of drivers demanding it.


In fact, some smart money that invested in Iowa farmland in 2000 is bailing out, happy to have made a profit. According to Duffy, 56% of Iowa farmland was owned by farmers from 2000 to 2005. The other 44% was owned by investors. The split today is 60% farmers and 40% investors.

Steve Leuthold no longer owns farmland he picked up for a song in the last bust. Leuthold, chief investment officer of Leuthold-Weeden Investment Capital in Minneapolis, sees ominous parallels between today's boom and those of the 1970s and 1980s, which saw farm prices soar. In Barron's Aug. 9, 1982, issue, he wrote a cover story entitled "Grim Reapers," which called the farmland market's top. His prediction of a 50% correction was overly optimistic; he ended up buying two Iowa farms at $600 an acre, 75% below their peak prices.

If the links don't work, go to Barron's and search on the title: Don't Bet the Farm

I expect theres a good deal of dispersion locally and regionally with those composite numbers.

Also, many of the inputs are accelerating as fast or faster than the output (corn price). In Wisconsin, land rental prices have been ratcheting up, and there is a 'local basis' on corn that is about 50 cents below the Chicago futures price (I'm not sure why, but its linked to transportation). Locals I know that do not own the land they farm, but rather lease it, and contract out the labor, seed purchase, plowing, planting, fertilizing, and harvest, are trying to lock in as many of these costs now as possible. I have heard from several people that are locking up fertilizer purchases now as they fear there might be shortages by summer due to more expected plantings.

As I mentioned a few weeks ago, I expect if credit crisis continues to unfold badly, there will be an increasing dichotomy between city real estate and productive farmland.

If I had my choice, I would have sold our house more than a year ago and rented something in a New Urbanism community, where I could walk to my office, but my wife has different ideas, so I walk our dog twice a day and watch the for sale signs going up a lot faster than they are coming down. But we are living below our means, with a minimal mortgage. Oh well.

Agricultural land is just about the only kind of real estate that I would like to own right now in the US.

An idea I have suggested before for people with more ideas than capital: put together a deal to buy a tract of farmland, perhaps via an option, and then market the deal to like minded people, with a group of investors owning 75% of the land paying for 100% of the costs, so the guy that put the deal together would get carried for 25%.

The question is where to go from there: a small organic farm or lease it out. If your goal is to run a farm, you need to provide for a capital cushion for start up costs. And I would try to go with an equity deal. No debt. In any case, the key goal is to move toward being a provider of essential goods and/or services.


The group purchase idea has been debated on hundreds of forums (well, at least dozens of forums)for years. I know of none that have not left someone/or a lot of people angry but this isn't the thread to go into why. I can say that, given my knowledge of how things have played out in those that have gone forward, there is no way I would get into a deal like this. One of the biggest examples was The Farm although it was more commune than group purchase.

Regarding farming: although capital is certainly important, knowing how to farm is more important.


knowing how to farm is more important.

You got that right. I’ve been a lifelong master gardener. I have two green thumbs, and for years I not only tended my garden but everyone else’s too. I was the guy you called when you needed plants or advice. I knew I would have to learn a lot when I bought my place a year ago but the amount I’ve had to learn is staggering. And the only way to do is to do it. I’m also fortunate I’m a tradesman and very accustomed to hard work. Some days I have to take two days off to rest my aching muscles. It should get easier once the grape trellises are in, and the rest of the trees planted, and the trees for the firewood cut, and the fence put in, and the workshop completed….. Oh, never mind!

I am also a Master Gardener.I have tried turning 2.9 ac. into a large perennial food machine with trees,vines,ect...but good god the startups a killer.My "retirement"has a work quota in it,though this year will be the first year we have a table for fruit sales at the local farmers market.{With every plant I can grow in a small trailer/sales cart.}150 trees,50 kiwi vines 400 asparagus crowns this year,more to come,raspberries tayberries,marion and blueberries.It helps to be a workaholic

Probably the most sensible idea for joint ownership, presumably through a corporation, would be to lease the land out for the time being, perhaps via sharecropping.

I am not arguing that food and energy production is easy--quite the contrary. I am arguing that it is better to be a net food and/or energy producer than a net food & energy consumer, or at a minimum you need to work toward being a provider of esssential goods and/or services of some type.

Stuart, Thank you for this excellent work. Your time and effort on such an exploration of this issue is clearly seen. As a side note I had been working on a submission to explore the very issues you have so clearly (and more completely than I would have) explored. I just wanted to let you know that a long-time lurker/recent sparse poster sincerely appreciates the time and efforts put into such an exposition.

I also want to remind you that the US is not alone in its delusion with respect to corn based ethanol:

In Aug 2006 the Premier of Ontario, Canada made this announcement:

"The St. Clair Ethanol Plant is the largest ethanol production facility in Canada with an expected production volume of 200 million litres per year. The plant has 38 full-time employees and is expected to use 20 million bushels of corn per year, creating ongoing opportunities for corn growers"

Stuart Staniford is softening on gardening!?!? Shocking !

I'm not sure I think this is quite the dagger in the heart of relocalization that you think it is, although it certainly complicates the analysis. It may well be true that it means that we'll never break up industrial farms, and that there will be powerful incentives to keep large scale agriculture going, but let's play this one out.

Biofuel production at this point is centered powerfully in the midwest, an area that has both the soil and the water for continued production. It is possible that other biofuel technologies will emerge, say to convert the prairie states to switchgrass, but thus far, they seem somewhat uncertain and set in the future. So what seems likely is that the midwest may to a large degree devote itself to large scale grain production for them who can afford it and for biofuels.

Which creates two linked, powerful incentives in other regions. The first is the growing of regional staple crops to substitute for grains for the large part of the US population that also is struggling to afford food - it is worth remembering that most Americans will have to buy both food and gas, and may find that they have to make unpleasant compromises there. They will thus have strong incentives to buy local foods that don't compete with biofuels - it is certainly possible that the Florida sweet potato crop could be converted to biofuels, or that Maine's turnips might turn out to be a potent source of ethanol, but I suspect more likely we will find people eating the foods available cheaply near them, which is likely to strengthen local agricultures and raise prices.

It will also create strong incentives to garden-farm/subsistence farm/practice mid-scale horticulture, that is to produce food on existing spaces not suited to ethanol crop production. In the former Soviet Union it was possible to become a "dill millionaire" and to get rich growing a quarter acre of a high value crop in an urban place. It can be easy, I think, to underestimate the sheer potential quantity of gardens, but, for example, New Jersey could become food self-sufficient if it could create 3 million additional 200 square foot gardens (or six million 100 square foot ones, or an equivalent amount of larger farms), according to one study.

IMHO, this actually produces a vastly greater incentive to farm/garden every square inch we've got. Unfortunately, I do not claim that this will avoid mass death, merely that a move towards relocalization, particularly in areas unsuited to large scale industrial grain farming, seems more, rather than less likely.

On the other hand, this data is fairly new to me (since it just showed up the other day) and it is possible I haven't fully grasped all the implications.


My favorite gardening article:

Published on 22 Jul 2004 by San Francisco Chronicle. Archived on 25 Apr 2005.
Berkeley: Urban farmers produce nearly all their food with a sustainable garden in their backyard

We don't even need to be talking in terms of "self-sufficiency" here. Most people living in towns or cities don't have enough land to grow 100% of their own food, but many of them do have enough land to grow SOME or even MOST of it. That is certainly my situation.

Supplying people with that 25% or 50% they can't produce themselves is certainly a different problem than is supplying them with 100% of their food. If we end up with a scenario where, say, 50% of agricultural productivity is diverted to biofuels production, then we only need the average person to produce 50% of their own food to make up the shortfall. (I'm speaking in terms of the US here, the foreign situation is another matter.)

Sometimes I get a little concerned about all of the self-sufficiency talk. It can be a daunting prospect to try to produce 100% of your own food. I wonder if some people might be put off even trying to grow anything at all? To my way of thinking, growing ANYTHING yourself is preferable to growing NOTHING. Even one plant of cherry tomatoes in a pot on the front porch is a start.

I agree Sharon,
I think that all efforts to support small local mixed farms should be undertaken with big family gardens and root cellars. Small mixed farming is the only semi-sustainable farming model known and according to some u.n. study some 300 times more efficient than big agribusiness (these efficiencies should be actively pursued). Grass fed ruminants are healthier have a much smaller footprint (much less methane and CO2 and negatives from the grain perspective)and confer healthier food for people.

The time necessary to build up the organic matter in your gardens shouldn't be underestimated. Compost and chickens where possible make a good combination. Every mouthful not consuming agri-food confers many benefits. Food miles, health, chemical usage, slavery. A real bang for your real buck.

Looking at this, if I was a farmer, the news that corn prices were now going to be arbitraged to oil prices would be about the best thing I'd ever heard - healthy profits as far as the eye can see.

No, because almost all of those 'indirect' inputs will also go up in price. Many of which are accelerating faster than the corn price (locally in WI, fertilizer is $500 per ton -I'll try and get more specifics) Farmers who own the land have a huge advantage over the ones leasing for sure.

Well, the price everything is indirectly linked to the price of oil. (Not really sure if this is true. Counterexamples are welcome.) In the case of most linkages, price rises in oil take a while to work their way through the economy, but an arbitrage linkage works directly on the daily trading on commodity markets. Since no one on this list really expects a long term decline in price of oil, we should expect that this will work to the advantage of farmers who raise corn.

I agree. The farmers will be much better off than the ethanol manufacturers, who have to pay the corn price, which is a function of all the higher inputs.

Hello SS,

Thxs for this keypost--topnotch as usual!

IMO, I think it is even worse for the world's poor than your graphs illustrate. As you know, I have pounding away on future NPK problems, but I am sadly lacking in charting skills. Hopefully you can find time to include NPK price analysis and availability to your next biofuel posting.

Basically, the more profitable biofuel and cellulosic becomes--the easier it is for these farmers to outbid the poor global farmers for NPK-- a double cascading blowback?--we should expect the poor subsistence farmer's harvest yields to plummet at some future NPK price point. An earlier posting link of mine posited that 3 gallons of gasoline were energy equivalent embedded in just a forty lb bag of NPK [Unfortunately the author did not lay out his calculations].

NPK tracks rising FF-prices, and P & K mines are very few compared to coal, oil, and natgas fields. Therefore, the processing and long-haul distribution logistics are a very daunting obstacle to a far-inland farmer. I also expect organic NPK prices such as manures, guano, humanure, and urban composts to closely follow the rise in FF-prices. As severe NPK depletion sets in [see EB's Anderson and Drury-- Peak Phosphorus for example]: the poor will be in for a extreme world of hurt.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

World wide Stuart you may have missed a potentially important factor. Biofuel production is generally done using modern large farm mechanized production. This is diesel/fertilizer etc. This is quite different and far more fossil fuel intensive vs traditional mixed peasant agriculture. This move to "American" farming as other countries enter the biofuels market should put a healthy dent into overall fuel supplies. So a lot more diesel will go down the ethanol tube.

Also of course other countries don't have the coal supplies and they may find it profitable to use fuel oil as part of the distillation process. Or even wood.
It may not be all sugar cane. In any case I think that for ever mbpd of ethanol we probably lose 1mbd of boe equivalent and this could well be fossil fuels.

The problem is that as long as Ethanol is profitable this demand is very inelastic and in a tight almost death spiral with oil prices. As ethanol production soaks up more energy oil prices rise keeping ethanol profitable.

So this will increase inelastic demand for oil in the poorer countries.
And thus not only is it tying in food its also tying in all other energy sources to the price of oil. In particular for the poorest countries the impact on propane prices may actually have a bigger impact than food prices. If propane gets used in the biofuels production.

Well, only if you consider 2.2% of our oil usage a "healthy dent":

Source: EIA via Peak Oil Debunked

Staggering chart. if we electrified most of our transportation and and didn't touch anything else we could cut our oil usage by 50%!

where is the doom? I don't see it.

if..... where is the doom? I don't see it.

You said IF. Then you opt to ignore IF in your question.

When things move beyond your *IF* - then you'll have a reason to not see doom-n-gloom.

Doomer tell us all day how much we waste oil driving to work from the suburbs. if something is waste, it can easily be cut out, correct? if it can't, is it really waste?

Do you have some point you want to make?

Who is this "doomer" you speak of who has an "all day" conversation about "waist oil"?

From what I can see - you are setting up your own straw men with words like "if" so you can feel good about yourself knock'n 'em down.

What if we don't electrify transport?
Or can't scale it up quick enough?

Not quite 2.2% of our usage but a lot larger fraction of a 3 third world countries fuel usage. It's very different from ours. Think about it Bangladesh moving to US style food production for fuel would probably double its fuel consumption.

The problem is what will pinch the overall budget of the poorest people in the poor countries the hardest the fastest ? I agree 100% with what your saying about food but in addition to this their will be a significant percentage increase for these countries in their fuel usage its not related to our 2.2% usage.

This requires a purchase.

But needless to say the fuel usage pattern in poor countries is quite different from ours and I believe if we could get some numbers that the impact of mechanized agriculture is actually quite large given that small base use level.

Next many of these governments subsidize fuel esp for agricultural use and the poor. These subsidies which do help keep the poor fed conflict with moving to produce food crops for fuel. If you try and prevent subsidized fuel from being used for fuel crops you open up a blackmarket.

A story on diesel for irrigation

Fuel crops would directly compete and the fuel usage should be equal.

Thus to me this effect is probably on the same scale as rising food prices.
The food farmers would also be competing for diesel with fuel crops.

Thus the overall price increase should be higher than what your modeling.
Then of course as food increases in price the farm workers have no choice but to ask for higher wages which makes mechanization potentially even cheaper vs using human labor. Or worse slave labor like situations like we hear about in Brazilian sugar cane fields.

So I see several other direct and indirect overall pricing pressures from using crops for fuel that indicate the real cost of living for the poor would probably increase faster then your predicting.

A world that uses biofuels to meet a lot of its needs fewer people.


What I want to know: Does the use of energy to produce fertilizer show up under Agriculture or Raw materials for the chemical industry?

In the US, nitrogen fertilizer is produced almost entirely from natural gas. Last time I checked, about half the US fertilizer industry had shut down due to high prices and we are importing it instead.

Brilliant post. One small assumption I would question is that all of the world's food supply is monetized. I visited Vanuatu last year and I would estimate that only 10% of the food eaten there involves money changing hands. It's an extreme case, but I expect that a reasonable percentage of global food economies, especially in rural areas, is unmonetized. These under-the-radar economies provide some buffering against global price rises. However the dislocated urban poor (of which there are billions) will feel the brunt much more strongly.

well, approximately 30% of my food was never monetized this year. But in theory, that freed up money to buy other things, the same that it would in Vanuatu.

Good point and a move to food for fuel will be "monetizing" a lot of this production. It could work to displace a lot of the traditional barter economy as food->fuel is worth real money.

Yeah - I think that's an important point to investigate further.

Stuart, this is a remarkable piece of work, and perfectly timed at that. It covers at an academic level the issue I have been raising for some time in comments like this and this. Having said that, I'd like to make a few observations.

First, although current global annual production of ethanol is much higher than that of biodiesel, due to US corn ethanol, biodiesel (mostly from soybean) will probably play an increasingly larger role because of the following reasons:

1. Soybean biodiesel has a much more robust EROEI than corn ethanol.

2. Soybean has lower fertilizer and pesticide requirements than corn, in absolute terms and even more when taking EROEI into account. "Per unit of energy gained, biodiesel requires just 2 percent of the N and 8 percent of the P needed for corn ethanol. Pesticide use per NEB differs similarly." (Quoted from the National Academy of Sciences recent report titled "Water Implications of Biofuel Production in the United States" at http://www.nap.edu/catalog.php?record_id=12039 .)

3. Outside the US, and particularly in Europe and in South American major grains and soybean exporters, the liquids fuels usage profile has a much higher share of diesel fuel relative to gasoline, with diesel fuel powering many personal vehicles.

4. Anywhere, diesel fuel's availability is more critical than gasoline's. No gasoline means it will be a pain to get to the supermarket, but no diesel fuel means there will be no goods in the supermarket.

5. Should a shortage of NG develop, most of today's NG-fired power plants can burn diesel fuel as well.

6. Finally, although I don't have a reference at hand to support it, I remember learning that the investment costs for a corn ethanol distillation plant are three times higher than those for a biodiesel plant of similar capacity.

Second, the fact that "the biofuel potential of the entire human food supply is quite a small amount of energy compared to the global oil supply - somewhere between 15-20% on a volumetric basis, so 10-15% on an energy basis -", although conceptually undisputable, is effectively irrelevant. Because the decision about how much agricultural production will be diverted into biofuels will not be made for the whole world by a hypothetical good-willed council that considers the world as one unit and balances the energy and food needs of the world's population. Rather, the decisions will be made by the countries which today are big agricultural exporters taking into account THEIR needs. And the key point here is that the countries with more biofuel production potential (e.g. Brazil, Argentina, Paraguay) have much lower liquid fuel (and energy in general) usage per capita than OECD countries. Therefore if they maximize the allocation of THEIR agricultural potential into biodiesel production (plus sugar cane to ethanol) for THEIR own use, they will be able to keep running the most important parts of THEIR current economies in the face of a future decline of global oil production (and a much harder decline of global oil exports), and it is just not realistic to expect they will forego that possibility.

Or would you realistically say to Argentines, etc. "Don't produce biodiesel, learn to live without fuels, go back to horses and oxen, and keep exporting wheat to the hungry of the world"? Wouldn't they reply "Since when do we have the duty of feeding the world?" Of course, if they drastically reduce their agricultural exports they will have accordingly to cut their imports of computers, plasma TVs and cell phones. But the future is not about gadgets. It's about having food and the energy to transport (diesel fuel), refrigerate (electricity) and cook (NG) it.

Therefore the most probable outcome is that, as oil prices go higher, a growing share of agricultural production will be diverted into biodiesel production. Land arbitraging based on profits per acre will drive the allocation of land out of wheat and corn production and into soybean production. Food exports will drop, food prices will rise, and poor people will be priced out of food.

I will try to express the above dynamics as a simple business case. Let's assume a farmer has the option of producing any of the following:
- Wheat (W)
- Corn (C)
- Soybean (S)
- Soybean Oil (BO) (using a co-owned mill from a local co-op), yielding soy flour as by-product.
- Soybean biodiesel (BD) (further processing BO at a co-owned refinery from a local co-op)

Let's use the suffix "a" to denote "per acre" (non-US folks can use "h" for "per hectare"). Thus, Wa = Wheat yield per acre. Each option yields a different profit per acre. Some key components of Profit per acre for W (and C and S) are:

Profit(Wa) =
= $ Wa
- $ fuel (for sowing, harvesting, etc.)
- $ fertilizer, herbicides and pesticides

While those for Soybean biodiesel are:
Profit(BDa) =
= $ BDa
- $ fuel (for sowing, harvesting, etc. the soybean)
- $ fertilizer, herbicides and pesticides
- $ milling operations energy input
+ $ Soy Flour byproduct
- $ refining operations energy input
- $ methanol
+ $ glycerin by-product

The case for allocating the land to biodiesel production occurs when:

Profit(BDa) > Max[Profit(Wa), Profit(Ca), Profit(Sa), Profit(BOa)]

Now, since BD is functionally equivalent to diesel fuel (DF), except for the fact that the volumetric energy density of biodiesel is about 9 % lower than regular Number 2 petrodiesel (http://www.biodiesel.org/pdf_files/fuelfactsheets/BTU_Content_Final_Oct2...), in the absence of any government-induced price distortion (through subsidies, differential taxes, etc.) we have:

$ BD = 0.9 x $ DF (per gallon/litre)

And, since the prices of most cost items for BD are more or less directly linked to the prices of fossil fuels (including methanol, which is currently made out of coal in China and NG elsewhere, with the exception of Germany where they use waste, according to http://www.methanol.org/pdf/WorldMethanolPlantsEndOf2006.pdf), which most probably will all rise along with the price of crude oil, though at different speeds, then Profit(BDa) will rise with the oil price in, at the very least, a roughly directly proportional fashion. In contrast, for W (and C, etc.) the oil price has an impact only on the cost items. Therefore, the higher the oil price, the higher Profit(BDa) and the lower Profit(Wa), Profit(Ca), etc.

At this point, arbitraging starts. As more land is diverted into BD production and less into grains, BD production will increase and its price will stabilize (I wouldn't say fall) while grains production will decrease and their prices will rise, until Profit(Wa) becomes competitive with Profit(BDa) and no further land is diverted into BD. However, since the prospects for world crude oil production is to experience a relentless decline after its near (2012?) peak, if demand for oil does not fall correspondingly on its own, oil (and diesel fuel) prices will keep rising, having a further diverging impact on Profit(BDa) and Profit(Wa), etc., and driving the land arbitraging mechanism to successive new equilibrium states with more land allocated to BD and less land to grains.

Therefore, in the absence of a worldwide adoption of the Oil Depletion Protocol, the prospects for world food production are quite dim.

A similar analysis as that for soybean biodiesel can be made for corn ethanol, the main difference being that the energy and fertilizer, etc. costs are so much higher for corn ethanol that it wouldn't yield a profit in the absence of huge government subsidies. Similar analyses can also be made for sunflower biodiesel and rapeseed biodiesel, but these options could turn out even worse from the viewpoint of world food production, since they do not even generate a byproduct of significant nutritional value such as soy flour.

While I agree that prospects for the world food production are dim, I think there are already growing constraints on expanding biodiesel production from vegetable oils. Below is a graph I use in a talk I give about biofuels, showing world total production of vegetable oil, the comparison of total diesel consumption to the conversion of all vegetable oil production to biodiesel, compared to the plans by a number of countries for the penetration of biodiesel. Even if we converted all vegetable oil in the world to biodiesel, we could achieve only a B8 blend--while countries such as South Korea are mooting moves to B20 or so. I don't see how this is possible, nor could production increases from Brazil or other soybean-growing countries (soybeans being a particular poor source of biodiesel) could make a dent in the potential increase in demand shown here. Given the critical role that vegetable oils have in providing nutrition calories to low-income people (and Stuart's graph of price elasticity of oils & fats at low income levels demonstrates how valuable they are), increased biodiesel production would have no less of an impact on low-income families than does increased ethanol production from corn.

Hi Sparaxis,

The problem with your reasoning is the same I pointed out with Stuart's (1): you are thinking globally, and that's just not the way the world will work when things start getting hard. It appears this is a point hard to get through, but I'll have a try.

"Even if we converted all vegetable oil in the world to biodiesel, we could achieve only a B8 blend."


"nor could production increases from Brazil or other soybean-growing countries (soybeans being a particular poor source of biodiesel) make a dent in the potential increase in (GLOBAL - added by Beach Boy) demand shown here."

This is the key point: Brazilians, Argentinians, etc. will not scale up biodiesel production (from soybean, sunflower or rapeseed, that's not the point) to satisfy global diesel fuel demand. They will do it to satisfy THEIR OWN DEMAND. So the analysis you have to make is, e.g. for Argentina:

- How much land they need to provide wheat, etc. for THEIR OWN population.
- How much biodiesel they would produce if the rest of their arable land were devoted to biodiesel production (pick the oilseed you want).
- How that potential biodiesel production compares to THEIR OWN current diesel fuel consumption.

Basically, if Argentina allocates ALL their current arable land to soybean (currently they allocate 53%), they would generate biodiesel to cover ALL their current diesel fuel consumption. If they used sunflower instead, they would need to allocate only 50% of the current arable land for that (2). Given that Argentina today is a big grains exporter, it is clear that they can provide food for their current population while at the same time producing enough biodiesel to avoid experiencing a dramatic impact from the coming relentless decline in global crude oil production.

Of course, they will not say so much in their presentations, which you can see at:
http://www.argentine-embassy-uk.org/biofuels/presentaciones/panel1.ppt and

"Given the critical role that vegetable oils have in providing nutrition calories to low-income people (and Stuart's graph of price elasticity of oils & fats at low income levels demonstrates how valuable they are), increased biodiesel production would have no less of an impact on low-income families than does increased ethanol production from corn."

True. Morevoer, the impact on nutrition would also be felt if vegetable oils were as dispensable nutrients as sugar, because of the decrease in wheat and corn production. But I wouldn't bet on their acting out of regard for the nutritional status of FOREIGN poor people.

(1) In the paragraph starting with: "Second, the fact that "the biofuel potential of the entire human food supply is quite a small amount of energy compared to the global oil supply - somewhere between 15-20% on a volumetric basis, so 10-15% on an energy basis -", although conceptually undisputable, is effectively irrelevant."

(2) Using yield figures from http://en.wikipedia.org/wiki/Biodiesel

The problem with your reasoning is the same I pointed out with Stuart's (1): you are thinking globally...

I agree. I don't think it's right to lump the entire global agricultural production together and assume the that it's in the free market and game for biofuels production. Each country is different and I would like to believe that there wouldn't be massive indigenous biofuel production in a country suffering for massive starvation. Okay - this is happening already to some extent, cash crops like coffee are grown in countries where people are starving but what Stuart is talking about is a different order of magnitude. I hope national government would outlaw massive biofuel production from indigenous crops if the population started to starve.

The result is that the indigenous agricultural production in food-stressed countries (where small price movements cause starvation) won't be put up for biofuels, won't be accessible.

This also means no global free market for food.

"I would like to believe that there wouldn't be massive indigenous biofuel production in a country suffering for massive starvation."

So would you also like to believe that countries do not export significant amounts of cash crops now, even when much of their population is undernourished?

Let's put it this way: if some countries may not care much about part of their own population being undernourished, is it realistic to expect that they will care about the nutritional needs of foreigners when deciding how much of their agricultural production to switch into biofuels?

I'm suggesting that Argentinean farmers, or Brazilian farmers, will care about more or less the same thing that American farmers care about: who is offering to pay the most for their crop.

True. But you can assume there will be government intervention to prevent starvation of the LOCAL poor population. Actually, that is happening today in Argentina. They have had EXPORT taxes on agricultural production ever since they devaluated in 2002 to prevent local prices to match international prices, since local salaries had become so low in dollars. And when in the last months soybean and wheat prices shot up, they significantly raised those export taxes (i.e. the percentages), again in order to prevent local prices from raising in line with international prices.

I agree in general that public policy responses are the best likely mitigator.

If we assume that public policy will largely stop people starving to death when indigenous production is available, the main problem becomes poor countries that are not self sufficient in food and therefore have to import. So maybe the interesting number is how many people living in poor countries are reliant on imported food. Those are the people at serious risk of the biofuel ramp up.

I have long felt that fueling farm equipment would be the very LEAST of the things we should be worrying about. Your analysis provides support for this hypothesis.

I think we have far more reason to be worried about eaters than we have to be worried about farmers.

Stuart, this is stunning. I was aware of the ethanol/food question but had not really delved into it.

Two points resonated with me:

However, just because it's not a very good idea globally, doesn't mean it wouldn't be profitable to the folks doing the conversion.

So, it is likely to happen and happen big, thus driving up the price of food. Will it stop before people in the third world start starving?

The core problem is that gasoline price elasticity in the US is about -0.05, versus the -0.7 price elasticity for food consumption by poor consumers. This makes clear who is going to win the bidding war for food versus biofuels in a free market.

Ouch. I don't think so.

aeldrig says,
"Will it stop before people in the third world start starving?"

As long as people in the third world are not starving, we have some time to work on a solution. But people in the third world are starving now,and have been starving for some time. It has always been sporadic starvation, and for different reasons in different places. But there is enough of a history of third world starvation that it will be hard to recognize when this cause of starvation has become a reality. So, as with most future shock problems it will be hard to mobilize a response until it actually happens.

I am no fan of corn ethanol but I have a question.

A large share of the US corn crop has always gone towards feeding livestock. When ethanol is produced from corn, the distillers grain is then fed to livestock as a byproduct of ethanol production. Let's say we historically used 40% of the corn crop for livestock feed and now we use 40% of the corn crop for ethanol and feed the distillers grain to the same amount of livestock, what has changed really?

You can't feed 100% distillers grains to livestock:


Dairy specialists recommend feeding DG at about 20% of the ration or 10 to 13 pounds per cow per day. For beef cattle, up to 30% of the ration or 7 to 15 pounds per day can be DG. Recommendations for swine are no more than 5% for nursery pigs, 15% for grower/finisher pigs, 10% for lactating, and 40% for gestating swine.

Some would say that feeding livestock all of that corn isn't a good idea either, but that's another matter.

It's kind of hard to say "thanks" for this great analysis, Stuart, but this is a timely heads-up on an aspect of ethanol that people haven't thought completely through. You've gone a few steps farther than Lester Brown and others have in developing the scope of this potential disaster. I hope you or someone else here will pass it along to him; he may have enough more clout than we do to get someone to listen to the problem.

I'm surprised that you left demand destruction out of your list of "major possibilities" for dealing with this problem, though. If Stoneleigh and Ilargi are right, the world's largest consumer of - well, everything - is about to have its collective credit cards yanked and not be able to consume as much of anything. As you've noted before, price elasticity of petroleum demand is low, but income elasticity is higher. If the world's largest gluttons consumers have to reduce their demand through recession, wouldn't that act to temper demand for ethanol facilities as well?

Well, "demand destruction" would fall under the oil prices dropping category. The credit crunch being much stronger than oil peaking in its effects (over the short term) is certainly a possibility that I worried about a lot a few months back. However, although I remain far from sure, I'm learning more towards thinking the recession is more likely to be a regular size recession. I just don't see the critical indicators of the real economy moving fast enough to suggest a sharp plunge into anything depression scaled. Calculated Risk summarized a similar view.

Again, thank you SS for all the work you do... for free!

Encourage everybody to go read (.pdf) the Dec 3, 2007 Iowa Farm Outlook, whose major topic is "Has the Ethanol Boom Ended?"
The author just retired but would no doubt be a valuable source of information if Stewart or anybody else is looking for confirmation or data checking.

In that article he shows the essentially sigmoidal curve of projected corn use for ethanol production, overlaid with the project corn export volume, showing that they conflict; and has a great map of Iowa with overlapping ethanol plant corn requirments as a share of the ag land. He concludes that Iowa will need to import corn to feed the plants, but that there will be no nearby state with the excess to ship. His conclusions:

The rapid expansion of the ethanol industry in Iowa is being driven to a large extent by much higher crude petroleum prices than in the past. Ethanol for motor fuel has been produced in Iowa for more than 30 years, but the movement of crude oil prices into the $80 to $99 per barrel range, vs. $15 to $25 in the late 1990s, has converted corn (and to a lesser extent soybeans) into an energy crop. With at least 75 U.S. ethanol plants currently under construction, the ethanol expansion has not yet ended. Just the plants currently being built in the U.S., operating at rated capacity, will need the equivalent of about 60 to 66 percent of global corn exports. Most, if not all of these plants, should be operating within three years, and many will be in production before that. In addition, some portion of the 343 plants being planned but not yet under construction will likely start construction within the next three years. This rapid expansion of the industry is likely to put downward pressure on ethanol processing margins and will bring substantial changes throughout U.S. and global agriculture.

Another source of data is the Food and Agricultural Policy Research Institute, which, according to the latest Iowa Farm Outlook:

FAPRI will be releasing its new Baseline estimates in early 2008 and they can be found at http://www.fapri.iastate.edu/ . These estimates will have annual forecasts of production and prices for 2008-2017. While no one expects a perfect forecast ten years into the future, the strength of the FAPRI Baseline is that it is internally consistent. It reflects US and international supply and prices that are in equilibrium given a particular policy scenario. For example, how will corn acreage and production change in competing countries given the recently signed Energy Bill in the US? How will acreage and prices for corn, soybeans, and other crops or inventories of livestock and poultry adjust in the US with increased biofuel production?

It might be worthwhile to be on the lookout for this when it is finished.

I say this because the ethanol industry rolls along... Note that in February that the Ag Secretary will be heading up a large annual agricultural confab in DC called "Energizing Rural America in the Global Marketplace":
(pdf) http://www.usda.gov/oce/forum/2008%20Ag%20Forum%20Program%20at%20a%20Gla...
in which one of the sessions is entitled "Ethanol: Is It a Sustainable Alternative?" The speakers for this session:
(pdf) http://www.usda.gov/oce/forum/SessionTopicsSpeakers122107.pdf
By name, the speakers are:
Mark Stowers, Vice President for Research and Development, POET Research
Robert Dinneen, President, Renewable Fuels Association
Michael T. Feldman, Vice President, Fixed Income, Currency and Commodities, Goldman Sachs & Co.
Rick Tolman, Chief Executive Officer, National Corn Growers Association

I wonder if the analysis that Dr. Wisner, Stewart, or others have performed will have much of an airing in such a group. Now, I expect that interest groups must represent the interests of their members... that is how representation works.

Nevertheless, bearers of bad news have little purchase in the halls of kings.

Mr. Staniford, thank you very much for writing this. It is terribly important and timely. I wonder if you (or someone else) could clarify a little the statement:
"The core problem is that gasoline price elasticity in the US is about -0.05, versus the -0.7 price elasticity for food consumption by poor consumers. This makes clear who is going to win the bidding war for food versus biofuels in a free market."
I know what that means, rich people have more buying power than poor people. But I'm a little fuzzy on exactly what the percentage elasticity means, and how that translates (mathematically) into who gets the goods.
For what it's worth, I have been publishing articles in small magazines, on the indymedia network, and printing zines of my own to try to raise awareness of the dangers of biofuel. As an evnironmental activist, it is horrifying to see the number of environmentalists jump on the biofuel bandwagon without understanding the history or likely future of biofuel. I also have a traveling slideshow that talks about these issues. It would be useful to understand the elasticity point a bit better so I could include it when I talk to other people about these issues.
Alexis Zeigler conev.org


Here's what it means. Let's say something happens that means there isn't quite as much cereal produced as the world had planned - a drought, thunderstorms, whatever. So now the price of cereals is going to go up. Let's say it goes up by 10%. And those cereals are being used by both eaters (in poor countries with price elasticity -0.7) and drivers via biofuels (let's just say in the US to simplify the example, with elasticity -0.05). So now who is going to conserve how much, given that 10% price rise? So the elasticities tell us that. The -0.7 elasticity tells us that the poor eaters will now use 7% (0.7*10%) less food on average because of price rise. Meanwhile, the American drivers with elasticity -0.05 only use 1/2% (0.05*10%) less as a result of the same price rise (assuming the ethanol price rise exactly matched the corn price rise). So the elasticity tells us that rich country fuel demand is much less price sensitive than poor country food demand (the fuel demand is less elastic). So when the two are competing for the same resource, so that the price has to go up, the elasticities tell us how the bidding war is going to go - the poor are going to give way, and the rich are not, or only a very little bit.

One caution is that this elasticity framework is designed for use with relatively small changes. Even then it's only an approximation, and once we start talking very large changes, it probably gets less and less accurate. So numbers for impact based on this kind of calculation (using elasticities to estimate the effect of large price changes) should be seen as generally indicative, but not precise - factor of 2 estimates at best.

But until price increase is high enough that it makes sence to make structural changes then pricing will remain inelastic. Consider someone who paid 40k for a SUV and prices increase to say 5 dollars a gallon for gasoling. At this point demand for SUV's will be basically non exisistant and assuming that the purchase was via credit the SUV owner is in pretty deep.

So lets say the SUV is worth 10k in this environment and the loan is 30k. The SUV owner would have to come up with 30k to get out from under the SUV and lets assume demand for hybrids and small cars is strong and they are running say 20k.

In total just to convert this SUV owner would have to spend say 35k upfront and have a loan of 15k or 45k in total. Given a 3 dollar price now this is for 5-3 = 2 dollars a gallon. or 60,000 gallons of gas just to break even lets say they double fuel economy then its 30,00 gallons. Say they drive 30,000 miles a year it would take ten years for them to break even on the conversion.

And 30k miles a year is a lot I think 15k is more common.

So for this person demand is basically inelastic unless they go buy the hybrid and allow the SUV to be reposed and destroy their credit.

So you can see that with a credit based society demand is probably very in-elastic.

This problem is common throughout our society we simply don't have the cash to make a transition and demand will remain inelastic until it makes sense for people to default on their debts to reduce fuel usage.

Basically a lot of people in the west have taken out long term loans on goods such as cars,boats,suburban homes and the value of these goods is underpinned by cheap gas. Once gasoline prices devalue the goods below the loan amounts then demand elasticity implies credit default.

So demand is inelastic and will remain so because of the leverage in western countries. And its this leverage that created the wealth in the first place.

I think one reason that demand is more elastic in the poorer countries is they simply don't have has much leverage.

So breakage is probably a better idea the elasticity.

I had to skim through this - it was very long, but...

I'm not in favor of corn based ethanol but I was under the impression that corn was too cheap, that cheap corn was, you know, evil! Dumping cheap corn on Mexico is putting their farmers out of business. Cheap corn (syrup) finding its way into all sorts of food it doesn't belong in. Corn fed beef makes a lovely breeding ground for that nasty ecoli.

If corn is more expensive doesn't that even the playing field for more sustainably raised/grown food? Grass fed beef, pastured poultry, and so on.

Just like we should want oil prices higher, no?

Best case scenerio is high corn prices but we use switchgrass for ethanol? Alge for biodiesel?

Filed under "Biomass/Biofuels."


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And Stuart, I really have to acknowledge your fantastic work on this...this truly is one of the best posts.


there are reasonably plausible scenarios for biofuel production growth to cause mass starvation of the global poor, and that this could happen fairly quickly - quite possibly within five years, and certainly well within the life of the existing policy regimes. It doesn't have to be this way, but unless we start doing things differently soon, the risks are significant

Yes, and this will be the undoing of the global biofuels push, which is merely a desperate stop-gap measure to mitigate the petroleum scarcity signaled in its price.

The problem is that this huge misallocation of resources is another case of going down a wrong path, thus wasting precious time toward powerdown solutions that cut consumption instead of replacing it with a fantasy that preserves our way of life.

Cellulosic ethanol will not bail us out this one either. That dream will likely not even achieve lift-off.


名不正则言不顺 - without clearly defined terms, no argument can go down well. - Confucius

not all biofuels are food-based. not all biofuels need arable land to start with. some biofuel producing plants can grow in semi-arid desert like areas and can even help to restore ground fertility.

True. But the ones that totally dominate the market today and are growing rapidly are all either made from food crops, or use arable land that otherwise would have grown food.

not in disagreement. some of the comments against biofuels without any careful qualification, however, may disservice an otherwise sound point.

Way upstream somewhere I wondered if the way out of this human starvation catastrophy was to be found in government regulation. I only meant it half seriously, because I'm aware of the terrible reputation government regulation has in the academic economist community and the Republican Party. You came back with the suggestion that the desired effect could be had through targeted taxation. (Which might also have been meant only half seriously.) IMO, both my suggestion and yours suffer from a serious lack of political realism. There are a lot of influential people who like subsidies, and don't like either taxes or regulations. Many of them are even Democrats.

So confronted with a path into the future that seems to be unavoidable, I look for yet another suggestion of a way out of your reasoning:
I quote from above;

"But the ones that totally dominate the market today and are ..."

I think your analysis fails if there is not a world market. Will this be the end of globalization as we know it? Without a global market many of the connections on which your argument rests will not be true. Of course, there still can be local markets, each of which is strictly smaller than global scale, and likely larger than the size of an ancient Greek city-state. (Yes, Greek city-states engaged in trade, but the trading links to people in Australia were surely insignificant.) What say you?

Great post and Thankyou. For me your post brings home the idea of hard times ahead as a reality more than ever. Whether it be thru famine, resource based wars or epidemics. There are just too many of us imperfect humans at this point in time and some, alot of us are going to have to die.

Again, the post was great and the comments just made it that much more so!

As Stuart has shown, there is a fossil fuels - biofuels dynamics in play that will drive the allocation of land to biofuel or grain crops on the basis of their respective profits per acre/hectare, where a higher oil price increases the profitability of biofuels and decreases that of grains.

On the other hand, the current generalized desire in developed countries to keep the happy motoring way of life in as much and for as long as possible, together with the corresponding generalized desire in developing countries (China, India) to adopt that lifestyle, make it improbable that global fuels demand will decrease endogenously in line with the coming decline in crude oil production. (By endogenously I mean due to changes in usage patterns or to financial/monetary causes (recession), as opposed to out of higher prices.) That means that the likely path for crude oil prices is up.

The conclusion from the above is that, as things currently go, the most likely outcome is that global food production will drop, food prices will rise, and poor people will be priced out of food.

Which in turn leads to a few important corollaries:

1. Government intervention increasing the profitability of biofuel production through subsidies, differential taxation, etc. amounts to hastening the appearance and aggravating the degree of the coming starvation. If it sounds like genocide, it probably is.

2. Ditto for environmentalist, global warming-driven opposition to increasing the amount of arable land through Amazon deforestation. Plainly stated, that would amount to condemning further millions to starve in the next decades out of concern that the sea level may rise in 100 years.

3. And the most sensitive issue of all: if these are today the realistic prospects for food production, they should be openly and plainly made known to everyone, particularly to people making procreation decisions. Like saying: "Given (the dynamics described in the first two paragraphs), the most likely outcome is that global food production in 20 years will be half or less than that of today. People making procreation decisions BEWARE."

Sure that doesn't sound good, but it's better than keeping people in a state of delusion. After all, I think everyone will agree that, if Hitler was intent on carrying out his "final solution", it would have been better if he had openly stated in 1938: "In three years, we will start enslaving and killing all Jews in Germany and most other European countries". Or that Truman had broadcast a message to Japan in 1945 saying: "In 72 hours, we will wipe off cities A, B, C and D with a new WMD, with nobody surviving in a 10-mile radius."

"...increasing the amount of arable land through Amazon deforestation."

Environmentalist tend to be in Europe, with a few in USA. They probably don't really have much influence over what Brazil actually does with Amazon forests. But --- Amazon land is very sensitive to misuse. Clearing and attempting to put it into market driven agriculture has failed many times over the past two centuries, and will surely fail again, it tried again. So, wrong headed as the environmentalist position is, I think it is unlike that they will accrue any blame in this coming disaster.

More likely, Amazon will be deforested so that Brazilian entrepreneurs can profit from planting new trees and selling carbon offsets. This will be, like corn ethanol, another example of people doing what is profitable rather than what is socially useful.

The rapid ramp "code red" infection feature of the ethanol plant build out with the mere 1 or 2 year lag from proposal to production is exactly the kind of emergency peak oil response we have to be doing now, but with nonfood cellulose feedstocks from land unsuitable for food crops. We don't have the luxury of umpteen year lead times for CTL, LNG, and nuclear plants. But we can't be doing it with our food supply. The agri industry understands that food as ethanol feedstock is just for starters. But as this analysis shows, the food for starters thing is very dangerous indeed and places tremendous pressure on the lab work being done.

I thought folks would like to know that:

In other news, India now requires 10% ethanol in all gasoline sold in the country.

Let me not forget:

The lettuce still seems to be safe at the moment...

The hulless barley grown here in Maryland is a winter cover crop that helps to soak up excess nitrogen from summer corn reducing runoff into the Chesapeake Bay. This is one of the few sensible ethanol crops I know of for the US though I think sweet sorghum could also make sense because it grows where rainfall is too scant for other crops. The main difficulty with sorghum seems to be concentrating the sap enough to make a good fermentation mix. I think that reverse osmosis could help with this.


I think that reverse osmosis could help with this.

Typically RO media and contamination are expensive enough issues that boiling is a better plan.

And, well, once you have the 5-15% ethyl alcohol - you still need to seperate from water - and that is a high energy reaction.

I notice that maple syrup is moving in the direction of reverse osmosis. Perhaps some of the issues are getting worked out. One aspect of using a stalk plant like cane or sorghum is that you have the remaining plant material to burn for distilling. This part of the reason Barazil so successful with ethanol.

The Southeast can expect reduced rainfall as a result of global warming and thus a decrease in arable land. One adaptation to this would be to hold rain water in the soil better as can be done by adding biochar. One of my co-chairs on the GPUS Eco-Action committee had a pretty good garden this year in Georgia despite the drought using this method. The production of biochar is exothermic so I wonder if it would not be wise to start a program of sweet sorghum cultivation on currently marginal lands which produces ethanol for fuel together with biochar to bring that land up above marginal, and work backwards as more and more land becomes marginal, thus retaining or even improving the current level of food productivity in the face of otherwise detrimental environmental change.


The lettuce still seems to be safe at the moment...

They are saving lettuce for the good stuff.

The biofuel potential of the entire human food supply is quite a small amount of energy compared to the global oil supply - somewhere between 15-20% on a volumetric basis, so 10-15% on an energy basis.

In round numbers, it would take 100% of world food production to replace current US petroleum imports with biofuels.

A compelling piece. It certainly framed and quantified the food vs. fuel concept that has more or less been nebulous to me.

This will have only modest benefits for global fuel supply, but will cause massive abrupt global hardship in poor countries. Many unforseeable consequences may follow from that.

My opinion is that if things go down according to your scenario you might see a few mentions of increased starvation on the news and probably a handful of celebrity activists activating but that's about it. We won't do shit, in other words, unless there are foreseeable and immediate consequences for western interests.

Fantastic work! It managed to erase the warm fuzzy glow left by your Vehicle Efficiency post

This chart from the EIA's AEO 2008 shows the price per BTU comparing oil, natural gas, and coal. The bottom three lines look a lot like your chart "Annual change in biofuel production through 2005".


I was thinking that because Ethanol is low EROI, it is essentially a conversion process for turning Natural Gas into oil. So one could argue that biofuels will grow when the price difference between NG and oil is large enough to cover the costs of growing the corn as a "processing stock". Or the price between oil and coal.

Then could you roughly predict when the biofuel boom will end? When the price of corn increases to wipe out the margin between coal and oil btu's? (The increase in coal price might be a factor if the amount of corn production were larger, but with it peaking at so little, coal might not increase in price enough to matter).

Could the essential problem be that oil is peaking first? If coal and NG had peaked first, there would be no way to power the biofuel conversion at a reasonable cost.

Then could you roughly predict when the biofuel boom will end? When the price of corn increases to wipe out the margin between coal and oil btu's? (The increase in coal price might be a factor if the amount of corn production were larger, but with it peaking at so little, coal might not increase in price enough to matter).

Interesting observation. I think about it this way – the feedstock is more valuable than the ethanol facility. Easier to build an ethanol plant than to farm (whether we’re talking palm oil, trees, or corn). So, the feedstock owner, facing a fragmented group of plant owners who control 30% of feedstock demand, prices corn so as to yield marginal cost economics (with no outsized economic return) to the ethanol plants. So, corn is gonna play catch up. Gets you to the same point – expect rapid growth in biofuels, and substantial escalation in food prices. Only question is whether ethanol is ever again a great business – because throwing aside govt mandates and MTBE phase-out (ie unanticipated non-market-based phenomena) – I don’t think profitability has ever been much.

Could the essential problem be that oil is peaking first? If coal and NG had peaked first, there would be no way to power the biofuel conversion at a reasonable cost.

That sounds very reasonable. Unfortunately, (fortunately?) that is not our situation.

Could the essential problem be that oil is peaking first? If coal and NG had peaked first, there would be no way to power the biofuel conversion at a reasonable cost.

I guess I was shocked at how irrelevant the human food supply has become as a percent of the Industrial Ecology (for want of a better term). Here we have a small price differential between two major energy sources and it portends to wipe out half the human food supply in short order. Which makes perfect sense, calorie wise, our food supply is a tiny piece of the whole system. So, what will happen when the price difference between coal and natural gas rises to the same difference?

I looked at the max corn price idea a little bit more. I would be grateful if anyone can spot any errors.

Coal was $1.211 per million BTU in 2006
Gasoline at $3.00 per gallon is $26.2 per million BTU

1 Bushel of corn converts 2.6 gallons of ethanol which is 0.1967 million BTU

The price difference between that much coal and gasoline is $4.93
Operating costs on that much ethanol is $1.04 (eyeballed from Stuart's chart on plant costs per gallon).
So corn could reach $3.89 per bushel at $3.00 gasoline

At $8.00 gasoline, the difference rises to $9.04 and a max per bushel cost of $8.00
Corn is ~ $3.20 per bushel now, so that is roughly a 100% rise in corn prices.

By the elasticity factors in the graph of human food supply above, that is a 70% reduction in the food demand by the poor and a 20% reduction in the food demand of the rich all put into motion by a further 5% reduction in global oil supply.


energy price data:

BTU per gallon data

gTrout, actually the biofuel boom process reaches equilibrium when the price of ANY crop can wipe out the margin between oil and the NG/coal input. Because the farmer has the option of planting any crop. As I said before, the boom goes on while:

Profit(biofuel) > Max[Profit(W), Profit(C), Profit(S), ...]

But your point is very good as it also applies to biodiesel, since NG or coal are feedstock for methanol production. The big difference is that biodiesel's EROEI is higher. So, if profit can be roughly expressed as the margin between the petroleum product they proportionally replace and the proportional NG input, we have:

Profit(C ethanol) = 0.66 x $Gasoline - (Kce x $NG)
Profit(biodiesel) = 0.9 x $Diesel - (Kbd x $NG)

The different EROEI means Kce > Kbd.

It is clear that, besides the taxes/subsidies on biofuels themselves, biofuels' profitability depends on the taxes/subsidies on gasoline and diesel. These vary wildly across different countries, as shown in the "International Fuel Prices 2007" document available from http://www.gtz.de/en/themen/umwelt-infrastruktur/transport/10285.htm

(edited, changing crude oil by the respectively replaced petroleum product)

I don't expect to see coal get massively expensive in the next decade or two. So I think the competition between fuel and food will cut off biofuel profitability first (essentially we'll run out of land before we run out coal). Although the poor cannot bid high for food, the global middle classes certainly can (if we define middle class as wealthy enough to own a car). Many crops are too expensive now to support profitable biofuels without subsidies/mandates. Corn is about the cheapest cereal, and I believe corn ethanol has been profitable without subsidies for significant portions of the last few years.

Stuart, thanks as always for a well-done, detailed analysis.

The idea of modeling biofuel production as a sigmoidal curve is very interesting. I am interested if you think this model could be applied to other topics of interest in peak oil, e.g. cumulative oil production. Presumably, this would follow a similar pattern - slow increase during infancy, rapid increase in the middle, and then slow increase at the end as there are no more potential "victims" (oil fields). The slope of the curve, of course, would be the rate at which oil was produced, and a plateau in production would correspond to the middle of the sigmoid (i.e. half of recoverable reserves produced).

The sigmoidal curve probably has many applications beyond what it is traditionally used for. Another example might be a model of the recent US housing bubble; the end of the bubble could be forecast by the decline in availablity of additional suckers to jump on the bandwagon.

Great post on an a sometimes overlooked subject that may became very important for the life of millions people.
However, I have a basic question/objection about the use of the logistic function for trying to model the biofuels production.
The logistic function describes a population grow depending on the reproduction of the existing population. The function describes many apparently different phenomena, and your animation of spread of code red show this process in a evocative way.
But I do no see the basis for trying to apply it to the biofuels production. The construction of new ethanol plants of course does not require the existence of other pre-existing plants.
The links with the existing plants may be in terms of building experience, and as you showed the major driving force for building new plants are the corn and ethanol market prices.
So the pre-existing plants may influence the construction of new plants via the market prices, I mean because they have an impact on the price of corn and ethanol because of the request-offer dynamics.
But in my mind this is a mechanism very different of the one regulating the spread of a virus; it would be really surprising that it would follow the same equation, and I do no know why it should be the case.
This consideration apply for instance the grow of cellulosic alcohol. If an economically convenient process is found to produce alcohol from cellulose, it's production can reach a critical mass in a "short" time even if we start from nothing, because the ramp up time depends on the plant construction time and not on the number of pre-existing plants.

Hi Luke:

There's a long tradition of applying the logistic (and similar) models in this kind of situation - see this paper, especially the second section for a quick overview of the ideas behind diffusion of innovations. The spread of ethanol plants strikes me as a pretty classic instance of this kind of thing.

The basic differential equation that gives rise to a logistic is dF/dt = kF(1-F), where F is the fraction of the potential whatevers to be infected/diffused to/spread to. In the early stages, when F << 1, this is basically dF/dt = kF which is the equation for an exponential. In the later stages, dF/dt ~ k(1-F), which approaches 1 exponentially.

Here's some examples of some actual data of diffusion curves. As you see, they are a bit messy, but roughly sigmoidal.

They generally have the "slower start, fast rise in the middle, slower end" property, but the parameter governing the startup and the end is clearly not the same.

I wouldn't claim the sigmoid in this problem as anything more than a rough model (that's I why I put the scenario not forecast notation in there). Since we know, as I discuss in detail, that the growth rate is very sensitive to the profitability, how fast they've grown in the past, and how much further they grow, has to take account of that. The future history of oil prices and corn prices will certainly make a difference. However, if oil prices keep going up, as I generally expect overall, then there's not much doubt this can go higher. And what the industry has proven is that it's capable of very high growth rates when conditions are right.

Theoretically, it's true that many plants could start at once, but this isn't all that likely in practice. The problem is that at the outset of a new industry, hardly anyone knows what they are doing. There are many problems to solve, and it may only be clear to a handful of visionaries how to solve them (and even they are probably underestimating the difficulty, since there's always "unknown unknowns"). The first few plants thus take a long time, use a lot of one-off solutions etc. Only fairly risk-taking managers and investors are willing to risk on the industry at this stage. After the first few plants, standardized solutions start to emerge, subcontractors and suppliers tool up, more investors are willing to take the risk now that they can see finished plants operating profitably; now the industry has some hope of scaling. However, building the more plants still takes people who know what they are doing, and that can only come from working with the folks who already figured it out. And there's a limit to how many new people one can recruit into a fast growing organization before the clue/person drops below some critical threshold and things start to go to hell. At 100%/year, the median person has been on the job 1 year, which isn't very long.

In summary, what is really spreading is the idea that it would be a good thing to take some food and turn it into fuel, along with a related complex of ideas about exactly how to go about the process. As that set of ideas spreads, more of our food is turning into fuel. And so to stop the process, it's necessary to create disincentives to the spread of those ideas. Some disincentives will appear on schedule without any particular effort (food prices are rising and people don't like that at all). However, activists can also work to change the culture, and that will help to slow the spread sooner.

Stuart, I think Luke62 is technically correct, but it could be that you have the proper equation that could be derived via a slightly different path. Luke62 is clearly correct that the current ethanol plants do not spawn new plants.

The rate of new plants arises from the perceived profit opportunities as you state. One cap on the number of plants is limited by the available bio-inputs, which I believe is one of your points, and this can be expressed in terms of the number of ethanol plants by the annual total crop divided by the average annual crop input per plant. Thus, the rate of new plants will be limited by the number of current plants (through their processing capacity) and the total crop. This limit will hold provided the margin for ethanol creation is positive. That is another of your points (or assumption?). What we may see is a bidding war for the plant inputs, and it should continue until either the total crop is exhausted or the margin collapses. A very disasterous scenario is increased ethanol subsidy in this latter case.

One example you could study to get an idea of the boom/bust in ethanol plants is the build-out of natural gas peaking units over the last decade in the USA. This cycle was limited by the collapsing spark spread due to rising natural gas prices. Could be a good fit here.

Another point I would make is that the expected famine your analysis suggests will probably manifest itself as urban violence. People will riot before they starve as the stocks are exhausted. Think Rwanda instead of Ethiopia. Neither scenario is pleasant.

Your piece is an excellent thought provoking analysis, as usual.

Stuart, let me try to clarify what I was trying to say in my previous message. I agree with the later stages that the number of new plants can be limited by the number of existing plants but only in the context that the existing plants have exhausted the profit margin or the bio-inputs, and the economics suggest it will be the profit margin (at great social expense).

In the case where F<<1, your application of the diffusion process suggests that the rate of new plants is proportional to the number of existing plants. Instead, it should depend upon (1) the perceived margin, and (2) the construction capacity. There is a link of the construction rate, perhaps, to the number of plants by the second factor, but the bulk of your analysis suggests it is a product of the first (i.e. increased margin). The first figure in the text demonstrates that. Your sigmoid fails for years prior to the year 2000. The increases in capacity have come from, you claim, increased petroleum prices. I politely suggest it has instead come from government mandates that have been a response to increased petroleum prices and other factors.

At this point it may be useful to refine a bit the expression of the business case.

In my previous posts, Profit(BD) referred to the profit for the full production chain, because I was assuming full vertical integration (i.e. farmers owned the mill and the refinery through a co-op). Even if there were no such integration, it still makes sense to look at the profit for the full chain because it has to be higher than that for just producing soybeans. But it might be more useful to separate the profits for each stage, e.g. for soybeans:

- Farming - Output: soybeans (S)
- Milling and oil refining - Input: S; Output: Soybean oil (BO) + Soybean Meal (SM)
- Transesterification - Input: BO; Output: SBD

Profit(SBD) =
= Profit(S)
+ Profit(BOmill)
+ Profit(SBDref)

For prices, it is necessary to specify whether they are retail or collected by the refiner, the difference being taxes (ignoring gas station margin by assuming that gas station profitability is the same for biodiesel and diesel fuel). Because the price equivalence with diesel fuel (DF) holds at the retail level. Therefore, for ANY biodiesel:

$BDretail = 0.9 x $DFretail

$BDref + $BDtax = 0.9 x ($DFref + $DFtax)

$BDref = 0.9 x ($DFref + $DFtax) - $BDtax

For corn ethanol, the price equivalence condition with gasoline (RB) would be:
$CEref = 0.66 x ($RBref + $RBtax) - $CEtax

Clearly, the business case for a biofuel is heavily dependent on both the tax/subsidy on the biofuel itself and the tax/subsidy on the substituted petroleum product (subsidy being a negative tax), so that if the petroleum product has a higher tax/lower subsidy than the biofuel the business case is improved. The level of taxation/subsidising on petroleum products varies wildly across different countries, as shown in the "International Fuel Prices 2007" document available from http://www.gtz.de/en/themen/umwelt-infrastruktur/transport/10285.htm .

It should be noted, however, that the case for biofuel production in a country does not necessarily arise out of the price equivalence condition holding in the producing country, because the biofuel can be produced for exporting to another country where the condition holds. Thus, while in November 2006 retail diesel prices in Argentina ($0.48 per litre) or even Brazil ($0.84) would not make the case for biodiesel production for local use, retail diesel prices for France ($1.33), Germany ($1.38), Italy ($1.49) and the UK($1.73) would paint a different picture for exports. And that was in November 2006, with a WTI price of $60. So it is reasonable to assume that the scaling up of biodiesel production will initially be driven by exports and only later - as domestic crude oil production declines significantly - be diverted to supply the local market. This prospect is supported, at least for Argentina, by an excellent study on their biofuels market available at http://www.biodiesel.com.ar/download/emerging_liquid_biofuel_markets.pdf

Therefore, using the price collected by the biodiesel refiner, the profit for the transesterification stage is, for soybeans:

Profit(SBDref) =
= $BDref
- $BOmill
- $ refining operations energy input
- $ methanol
+ $ glycerin by-product

The profit formula uses $BOmill and not $BOretail because typically the owner of the milling and oil refining facility also owns the biodiesel refinery. So the profit is related to the price they get for BO, which is its cost for the transesterification stage.

It should be noted that the difference in profits for the transesterification stage using different vegetable oils as feedstock depends only on the price of the vegetable oils. However, this should not be expected to lead to instantaneous arbitration between oilseeds. Because, in contrast with transesterification facilities which can equally process any vegetable oil, milling facilities are specific for each oilseed. Therefore, oilseed arbitration would depend on the combination of Profit(*OILmill) + Profit(*BDref).

Does anybody know about this site ( http://www.earthlab.com ) ? I have seen other environmental sites with carbon calculators like yahoo and tree huggers, but I am wondering what the deal with earthlab.com is? I saw they also published a list last month of the top ten greenest cities ( http://www.efficientenergy.org/Top-Ten-Green-Cities-in-the-United-States ). Does anyone know if this site is better than the others? Fill me in!

I took their carbon foot print test and it was pretty interesting, they said that I put out 4.5 tons of carbon, does anyone know about any other tests?

This analysis is complex and well-documented, but is it correct? Here is the key assumption:

"The underlying idea is that both oil and cereals are global commodity markets. If it's profitable to make food into fuel in the US, even without a subsidy, then it's profitable elsewhere also - possibly more so given lower labor costs. So the basic growth dynamics are the same."

Would it be profitably today to convert corn to ethanol in the US w/o subsidies on that conversion? The cost of production and revenue graphs do not account for subsidies, which are of course massive. If the answer is "no" the basis disappears for these disturbing projections of ever-growing diversion of food crops into energy. Instead we must consider the political support for ethanol subsidies.

While powerful, more Americans eat than grow corn. Almost certainly the growth of this industry will generate negative feedback, as taxpayers grow unhappy with the increasing cost of ethanol subsidies AND rising food costs. These factors are implicitly mentioned above, but realizing the central role of gov't subsidies must move them to center stage in such an analysis.

Government subsidies probably have a large role in biofuel production in other temperate regions. A similar analysis to this for tropical regions (e.g., sugar in Brazil) might be more appropriate, with conclusions of higher reliability than these – but perhaps equally disturbing.