Grain drain

The world is increasingly turning to ethanol made from corn to power its cars. A good thing you might think, except when it means making a choice between providing green fuel and food. Lester R Brown investigates

Now that the year's grain harvest is in, it is time to take stock and look ahead. This year's world harvest of 1,967m tonnes falls short of the estimated consumption by some 73m tonnes. This shortfall (nearly 4%) is one of the largest on record.

Even more sobering, in six of the past seven years world grain production has not matched demand. As a result, world reserve stocks of grain have been reduced to 57 days of consumption (65 days is the suggested minimum) - the lowest level in 34 years. The last time it was this low, wheat and rice prices doubled.

The growth in world grain consumption during the six years since 2000 averaged roughly 31m tonnes a year. Of this growth, close to 24m tonnes were consumed as food or feed. But it is the amount of grain used to produced fuel that is exploding. The annual growth in grain used to produce fuel ethanol for cars averaged nearly 7m tonnes for the US alone, climbing from 2m tonnes in 2001 to 14m tonnes in 2006.

Investment in crop-based fuel production, once dependent on government subsidies, is now driven by the price of oil. With the current price of ethanol double its cost of production, the conversion of agricultural commodities into fuel for cars has become hugely profitable. In the US, this means that investment in fuel ethanol distilleries is controlled by the market, not by government.

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