Landline: Food vs Fuel

The ABC's Landline program has an interesting pair of stories this week - the first looking at Food vs Fuel (Video: Windows Hi - Windows Lo - Real Hi - Real Lo).

The biofuel business is buzzing over the increasingly heated debate over the costs and benefits of the industry. Proponents argue it’s a cleaner greener and renewable form of energy. However critics say converting crops into fuel will simply create food shortages and skyrocketing commodity prices.

The second segment of interest was on the ethanol debate (Video: Windows Hi - Windows Lo - Real Hi - Real Lo).

This year's Ethanol Conference in Australia coincides with the very lively debate here and overseas on the pros and cons of biofuels. Todd Sneller helped develop an alternative fuel industry from scratch in the US mid-west. He's from Nebraska the corn-husker state that is putting more and more of their maize into motor cars. Anne Kruger caught up with Mr Sneller at the 2008 Ethanol Conference held in Sydney this week.

I don't agree with subsidizing biofuels. I do own and enjoy burning corn in a non-subsidized corn stove. The corn stove started making econ sense in 2004 when the farmer began delivering a cheaper BTU to the marketplace than the petro industry.

The part of the debate that makes zero sense is the assertion that were it not for subsidized biofuels, grains would have somehow stayed cheap. That is crazy talk. $110 crude oil and $2 corn don't mix.

Using last friday's closing prices, a bushel of corn burnt in a stove breaks even at about $7.50/bu vs crude oil.
Corn is only $6/bushel.

In 1998, corn in a stove broke even at 75 cents/bu. It was $2 in 1998.

In 1915, a third of all land went to feed horses. That was diverting acres for fuel. Why was there no fuss about this waste of farmland then?

The use of top-grade farmland for fuel is old as agriculture itself, and had a brief hiatus during the cheap oil era.


The problem with gov't subsidies is the unintended consequences that alwayss go with them. Subsidizing agriculture during the 20th century created sub-market food prices resulting in the human population overshooting the planet's carrying capacity. The excesses created by subsidies always correct in time. The correction of the population bubble induced via grain subsidies during the 20th century will not be pretty.

Had there been no grain subsidies during the 20th century, corn would never have been cheap enough to burn today.