Conventional wisdom says that growing corn to produce ethanol contributes to harmful food price spikes. But it's not that simple.
The argument is that increased ethanol production creates demand for corn, and demand can obviously lead to higher prices. It's not that simple, however, because higher prices also incentivize farmers to grow more corn, and greater supply will tend, in turn, to lower prices.
Barrett Kirwan, professor of Agricultural and Consumer Economics at the University of Illinois, and Stacy Sneeringer of the USDA's Economic Research Service have teamed up to get to the bottom of how ethanol-driven demand affects corn prices. Their research is in still in progress, but they are beginning by trying to disentangle the relationship between corn production and ethanol production.
So far, they've come up with these charts, which clearly illustrate the increase in both corn production and ethanol facilities (blue dots) over the past decade. They also show the geographic correlation between corn and ethanol production—both have expanded northwest through Minnesota and into the Dakotas. The question Kirwan and Sneeringer are trying to answer is a chicken-and-egg one—do ethanol facilities sprout up where corn is already bountiful, or is the arrival of an ethanol facility the reason that corn production expands?
In a future of limited resources (land, water, and fossil fuels) and increased demand (population growth), the tension between biofuels and food is just one of a larger set of difficult decisions we'll be facing more and more often. Kirwan and Sneeringer's research aims to untangle the ways supply and demand interact with markets and policy, which is exactly the kind of nuanced information we need to understand the global consequences of our agricultural and economic policies—and make better use of earth's remaining assets. I'll keep you posted on their future findings.
Charts via ideaHarvest.
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