Crops for Fuel = Rising Food Prices Worldwide

Apr 30, 2007

In the U.S. and around the world, the production of crop-based fuels, such as ethanol and bio-diesel, is being touted as the answer to pollution, the environment and global warming.

In all respects, it’s a lie. In the U.S. itself, the plants that today convert corn to ethanol use MORE energy than they produce. And since that energy is supplied for the most part by burning coal, they produce more pollution than is saved on auto emissions.

In southeast Asia, enormous forests are being burnt down in order to plant palm trees to supply palm oil to European power plants that are being converted to burn that supposedly more environmentally friendly “bio-fuel.” The fires are so huge and intense, Indonesia has become the third largest source of carbon dioxide gas, after the U.S. and China.

Other companies are planning to turn manioc, the starch-rich food staple for poor people in sub-Saharan Africa, into fuel as well. If this happens, it could trigger even greater hunger and starvation for some of the poorest people on the planet.

In fact, around the globe, capitalism’s latest mania—for “eco-friendly fuel”–is weighing on food production. In the U.S., grain prices have almost doubled in the last year, driven by the rising production of ethanol. In 2006, about 16% of the U.S. grain harvest went into the production of ethanol. By 2008, the production of ethanol is expected to double.

Rising grain prices have in turn attracted speculators into the commodity markets. Hedge funds are making huge bets on corn and the bull market unleashed by ethanol.

All of this is driving up the price of food. Economists now say that consumers should expect to see higher prices this year on everything from milk to cereal, to soft drinks, to meat. Testifying before Congress last month, spokespersons for the poultry industry warned of higher poultry prices because of what the group described as “the ethanol crisis.”

The companies that are getting into the production of ethanol and biofuel, agribusiness, speculators and big farmers have long profited from heavy government subsidies, totaling nine billion dollars in 2005. But as grain prices rise, crop subsidies are dropping. Big agriculture isn’t worrying however. Energy legislation passed in 2005 and a pending farm bill designed to support ethanol producers provide a vast range of brand new tax credits, grants, and government loans for the production of ethanol.

So, ordinary people pay twice: first for the increased food prices and then as more of their tax dollars go to subsidize big business.

Of course, this rise in grain prices in the U.S., which exports a big part of its crop, has reverberated throughout the world.

For example, the fact that the price of the corn that the U.S. exports to Mexico more than doubled at the end of 2006, not only drove up prices, but it led to both hoarding and speculation in Mexico, which drove up price increases even higher.

The rise in prices of U.S. grain exports have also helped fuel big price increases for food in India, Turkey, China, as well as Eastern Europe. At the same time, global grain stocks are at their lowest level in 30 years and could become even tighter if farmers divert more crops to make ethanol or other fuels, with the danger of food shortages looming.

The only thing the stepped-up production of ethanol and other biofuels provides is more profits and wealth of big companies and speculators.