There are some interesting new statistics about how much of the corn grown in the United States is directly consumed for food. These numbers, which come from a transcript of a recent conference call about the food-versus-fuel debate hosted by the Renewable Fuels Association (a pro-ethanol group), are worth a look. (The transcript is available here in PDF format.)

In 2007, the U.S. had 85 million harvested acres of field corn that produced 366 million tons of product valued at $52 billion, according to Rick Tolman of the National Corn Growers Association. He broke down how the corn was used:

42% went for livestock feed
9% went for direct human consumption
22% percent went for ethanol production
17% was exported
10% was carry-over

When the ethanol mandate hits its 15 billion gallon cap in 2015, Tolman said, the corn industry “can see no more than 27 percent of our corn crop ever going for ethanol use.”

Tolman’s main point was that ethanol isn’t taking food out of anyone’s mouth. In fact, the U.S. will export record amounts of corn this year. This is because productivity has grown, Tolman argues, specifically the number of bushels yielded by a single acre. In 1967 the national average yield was 80 bushels to the acre; last year the figure rose to 151 bushels per acre. How did this happen? Biotechnology:

Our corn yields have doubled in the last 40 years using less inputs. We expect them to double again in the next 20 years. Why is that happening? Because of biotechnology, because of improvements in corn breeding, because of the sequencing of the corn genome. We have much more technology to put the traits in that give us yield enhancement.

Tolman did acknowledge that corn prices have played a role in driving up retail prices for food. He believes corn can account for 25-30 percent of the price hikes. The farm industry’s math showing why it isn’t responsible for the bulk of price increases looks like this:

There are 56 pounds of corn in a bushel.

Right now a bushel is going for $5-$6 a bushel (the Agriculture Department has estimated that the average price for the year will be $4 a bushel). In 2003, the price of corn was $2.50 a bushel, according to Tolman.

If we take $5 as the average price, that comes to 9 cents a pound.

It takes 2.8 pounds of corn to produce a pound of beef.

At $5 a bushel, that’s 25.2 cents worth of corn in a pound of beef. At four dollars a bushel it is 19 cents. That’s a difference of 6 cents per $1 per bushel increase. So, the reasoning goes, the changing price of corn can’t be blamed for the rising price of food. Instead, it’s the price of oil, Tolman argued, that should be blamed for food prices — “that’s where the impact is coming” from, he said.

Meanwhile, Texas Governor Rick Perry, a Republican, has some figures of his own. Last month, he asked the Environmental Protection Agency to reduce by half the amount of ethanol that must be blended into the nation’s gasoline supplies. In making his case for a waiver — which would apply only to Texas — Perry said ethanol production is lifting costs for Texas livestock producers. A one-cent rise in the price of a bushel of corn costs the Texas livestock industry an additional $6 million, according to Perry’s request, because the state industry uses about 900 million bushel of corn feed each year. The increase in the price of a bushel of corn between 2004 and 2007 will end up costing Texans more than $1 billion, the waiver request claims. Governor Perry’s request is available here in PDF format.

Power Politics

May 26, 2008