That bowl of Kellogg’s Cornflakes on the breakfast
table, or the portion of pasta or corn tortillas, cheese or meat on the
table is going to rise in price over the coming months as sure as the
sun rises in the East. Welcome ladies and gentlemen to the new world
food price shock, conveniently timed to accompany our current world oil
Curiously it’s ominously similar in many respects to
the early 1970’s when prices for oil and food both exploded by several
hundred percent in a matter of months. That mid-1970’s price explosion
led President Nixon to ask his old pal, Arthur Burns, then Chairman of
the Fed, to find a way to alter the CPI inflation data to take
attention away from the rising prices. The result then was the
now-commonplace publication of the absurd “core inflation” CPI
numbers–sans oil and food. Stephen Roche was the young Fed economist
who was assigned the statistical manipulation job by Burns.
The late American satirist, Mark Twain once quipped,
“Buy land: They’ve stopped making it…” Today we can say almost the same
about corn or all grains worldwide. The world is in the early months of
the greatest sustained rise in grain prices, for all major grains
including maize, wheat, rice that we have seen in three decades. Those
three crops constitute almost 90% of all grains cultivated in the world.
Washington’s calculated, absurd plan
What’s driving this extraordinary change? Here
things get pretty interesting. The Bush Administration is making a
major public relations push to convince the world it has turned into a
“better steward of the environment.” The problem is that many have
fallen for the hype.
The center of his program, announced in his January
State of the Union Address is called ’20 in 10’, cutting US gasoline
use 20% by 2010. The official reason is to “reduce dependency on
imported oil,” as well as cutting unwanted “greenhouse gas” emissions.
That isn’t the case, but it makes good PR. Repeat it often enough and
maybe most people will believe it. Maybe they won’t realize their
taxpayer subsidies to grow ethanol corn instead of feed corn are also
driving the price of their daily bread through the roof.
The heart of the plan is a huge, taxpayer subsidized
expansion of use of bio-ethanol for transport fuel. The President’s
plan requires production of 35 billion gallons (about 133 billion
liters) of ethanol a year by 2017. Congress already mandated with the
Energy Policy Act of 2005 that corn ethanol for fuel must rise from 4
billion gallons in 2006 to 7.5 billion in 2012. To make certain it will
happen, farmers and big agribusiness giants like ADM or David
Rockefeller get generous taxpayer subsidies to grow corn for fuel
instead of food. Currently ethanol producers get a subsidy in the US of
51 cents per gallon ethanol paid to the blender, usually an oil company
that blends it with gasoline for sale.
As a result of the beautiful US Government subsidies
to produce bio-ethanol fuels, and the new legislative mandate, the US
refinery industry is investing big time in building new special ethanol
distilleries, similar to oil refineries, except they produce ethanol
fuel. The number currently under construction exceeds the total number
of oil refineries built in the US over the past 25 years. When finished
in the next 2-3 years the demand for corn and other grain to make
ethanol for car fuel will double from present levels.
Not just USA bio-ethanol. In March Bush met with
Brazil’s President to sign a bilateral “Ethanol Pact” to cooperate in
R&D of “next generation” bio-fuel technologies like cellulosic
ethanol from wood, and joint cooperation in “stimulating” expansion of
bio-fuels use in developing countries, especially in Central America,
and creating a “bio-fuels OPEC-like” cartel market with rules that
allows formation of a Western Hemisphere ethanol market.
In short, the use of farmland worldwide for
bio-ethanol and other bio-fuels—burning the food product rather than
using it for human or animal food—is being treated in Washington,
Brazil and other major centers, including the EU, as a major new growth
Phony green arguments
Bio-fuel—gasoline or fuel produced from refining
food products—is being hyped as a solution to the controversial Global
Warming problem. Leaving aside the faked science and the political
interests behind the sudden hype about dangers of global warming,
bio-fuels offer no net positive benefits over oil even under best
conditions. Its advocates claim that present first generation bio-fuels
“save up to 60% of carbon emission.” As well, amid rising oil prices at
$75 per barrel for Brent marker grades, governments such as Brazil’s
are frantic to substitute homegrown bio-fuels for imported gasoline. In
Brazil today 70% of all cars have “flexi-fuel” engines able to switch
from conventional gasoline to 100% bio-fuel or any mix. Bio-fuel
production has become one of Brazil’s major export industries as well.
The green claims for bio-fuel as a friendly and
better fuel than gasoline are at best dubious, if not outright
fraudulent. Depending on who runs the tests, ethanol has little if any
effect on exhaust-pipe emissions in current car models. It has
significant emission, however, of some toxins including formaldehyde
and acetaldehyde, a suspected neurotoxin which has been banned as
carcinogenic in California.
Ethanol is not some benign substance as we are led
to think from the industry propaganda. It is highly corrosive to
pipelines as well as to seals and fuel systems of existing car or other
gasoline engines. It requires special new gas pumps. All that
conversion costs money.
But the killer-diller about ethanol is that it holds
at least 30% less energy per gallon than normal gasoline, translating
into a loss in fuel economy per gallon of at least 25% over gasoline
for an Ethanol E-85% blend. No advocate of the ethanol boondoggle
addresses the huge social cost which is beginning to hit the dining
room tables across the US, Europe and the rest of the world. Food
prices are exploding as corn, soybeans and all cereal grain prices are
going through the roof because of the
astronomical—Congress-driven—demand for corn to burn for bio-fuel.
This year the Massachusetts Institute of Technology
issued a report concluding that using corn-based ethanol instead of
gasoline will have no impact on greenhouse gas emissions, and would
even expand fossil fuel use due to increased demand for fertilizer and
irrigation to expand acreage of ethanol crops. And according to MIT
“natural gas consumption is 66% of total corn ethanol production
energy,” meaning huge new strains on natural gas supply, pushing prices
The idea that the world can “grow” out of oil
dependency with bio-fuels is the PR hype being used to sell what is
shaping up to be the mist dangerous threat to the planet’s food supply
since creation of patented genetically manipulated corn and crops.
US farms become bio-fuel factories
main reason US and world grain prices are soaring in the past two years
and now pre-programmed to continue rising at a major pace, is the
conversion of US farmland to become de facto bio-fuel factories. In
2006 US farmland devoted to bio-fuel crops increased by 48%. None of
that land was replaced for food crop cultivation. The tax subsidies
make it far too profitable to produce ethanol fuel.
Since 2001 the amount of maize used to produce
bio-ethanol in the USA has risen 300%, trend increasing going forward.
In fact, in 2006 US maize or corn crops for bio-fuel equaled the
tonnage of corn used for export. In 2007 it is estimated it will exceed
the corn for export by a hefty amount. The US is the world’s leading
corn exporter, most going for animal feed to EU and other countries.
The traditional USDA statistics on acreage planted to corn is no longer
a useful metric of food prices as all marginal acreage is going for
bio-fuel growing. The amount available for animal and human feed is
Brazil and China are similarly switching from food to bio-fuels with large swatches of land.
A result of the bio-fuel revolution in agriculture
is that world carryover or reserve stocks of grains have been plunging
for six of the past seven years. Carryover reserve stocks of all grains
fell at the end of 2006 to 57 days of consumption, the lowest level
since 1972. Little wonder that world grain prices rose 100% over the
past 12 months. This is just the start.
That decline in grain reserves, the measure of food
security in event of drought or harvest failure—an increasingly common
event in recent years—is pre-programmed to continue going as far ahead
as the eye can see. Assuming modest world population increase annually
of some 70 million people over the coming decade, especially in the
Indian subcontinent and Africa, the stagnation or even decline in the
tonnages of feed corn or other feed grains including rice that is
harvested annually as growing amounts of bio-ethanol and other
bio-fuels displaces food grain, in fact means we are just getting
started on the greatest transformation of global agriculture since the
introduction of the agribusiness revolution with fertilizers and
mechanized farming after World War II. The difference is that this
revolution is at the expense of food production. That preprograms
exploding global grain prices, increased poverty and malnutrition. And
the effect on gasoline import demand will be minimal.
Prof. M.A. Altieri of Berkeley University estimates that dedicating all USA
corn and soybean production acreage to bio-fuels would only meet 12% of
gasoline and 6% of diesel needs. He notes that though one-fifth of last
year’s corn harvest went to bio-ethanol, it met a mere 3% of energy
needs. But the farmland is converting at a record pace. In 2006 more
than 50% of Iowa and South Dakota corn went to ethanol refineries.
Farmers across the Midwest, desperate for more income after years of
depressed corn prices, are abandoning traditional crop rotation to grow
exclusively soybeans or corn with dramatic added impact on soil erosion
and needs for added chemical pesticides. In the US some 41% of all
herbicides used are already applied to corn. Monsanto and other makers
of glyphosate herbicides like Roundup are clearly smiling on the way to
Going global with bio-fuels
The Bush-Lula pact is just the start of a growing
global rush to plant crops for bio-fuel. Huge sugarcane, palm oil and
soy plantations for bio-fuel refining are taking over forests and
grasslands in Brazil, Argentina, Colombia, Ecuador and Paraguay. Soy
cultivation has already caused the deforestation of 21 million hectares
in Brazil and 14 million ha in Argentina, with no end in sight, as
world grain prices continue to rise. Soya is used for bio-diesel fuel.
China, desperate for energy sources, is a major
player in bio-fuel cultivation, reducing food crop acreage there as
well. In the EU most bio-diesel fuel is produced using rapeseed plants,
a popular animal feed. The result? Meat prices around the globe are
rising and set to continue rising as far ahead as the eye can see. The
EU has a target requiring minimum bio-fuel content of 10%, a foolish
demand that will set aside 18% of EU farmland to cultivate crops to be
burned as bio-fuel.
Big oil is also driving the bio-fuels bandwagon.
Prof. David Pimentel of Cornell University and other scientists claim
that net energy output from bio-ethanol fuel is less than the fossil
fuel energy used to produce the ethanol. Measuring all energy inputs to
produce ethanol from production of nitrogen fertilizer to energy needed
to clean the considerable waste from bio-fuel refineries, Pimintel’s
research showed a net energy loss of 22% for bio-fuel—they use more
energy than they produce. That translates into little threat to oil
demand and huge profit for clever oil giants that re-profile themselves
as “green energy” producers.
So it’s little wonder that ExxonMobil, Chevron and
BP are all into bio-fuels. This past May, BP announced the largest ever
R&D grant to a university, $500 million to the University of
California-Berkeley to fund BP-dictated R&D into alternative energy
including bio-fuels. Stanford’s Global Climate and Energy Program got
$100 million from ExxonMobil; University of California-Davis got $25
million from Chevron for its Bio-energy Research Group. Princeton
University’s Carbon Mitigation Initiative takes $15 million from BP.
Lord Browne, the disgraced former CEO of BP declared
in 2006, “The world needs new technologies to maintain adequate
supplies of energy for the future. We believe bioscience can bring
immense benefits to the energy sector.” The bio-fuel market is booming
like few others today. This all is a paradise for global agribusiness
industrial companies like Cargill, ADM and Monsanto, Syngenta.
All this, combined with severe weather problems in
China, Australia, Ukraine and large parts of the EU growing areas this
harvest season, guarantee that grain prices are set to explode further
in coming months and years. Some are gleefully reporting the end of the
era of “cheap food.” With disappearing food security reserves and
disappearing acreage going to plant corn and grains for food, the
bio-fuel transformation will impact global food prices massively in
Another agenda behind Ethanol?
Uh Huh. The dramatic embrace of bio-fuels by the
Bush Administration since 2005 has clearly been the global driver for
soaring grain and food prices in the past 18 months. The evidence
suggests this is no accident of sloppy legislative preparation. The US
Government has been researching and developing bio-fuels since the
1970’s. The bio-ethanol architects did their homework we can be
assured. It’s increasingly clear that the same people who brought us
oil price inflation are now deliberately creating parallel food price
inflation. We have had a rise in average oil prices of some 300% since
the end of 2000 when George W. Bush and Dick Halliburton Cheney made
oil the central preoccupation of US foreign policy.
Last year, as bio-ethanol production first became a
major market factor, corn prices rose by some 130% on the Chicago in 14
months. It was more than known when Congress and the Bush
Administration made their heavy push for bio-ethanol in 2005 that world
grain reserves had been declining at alarming levels for several years
at a time when global demand, driven especially by growing wealth And
increasing meat consumption in China, was rising.
As a result of the diversion of record acreages of
US and Brazilian corn and soybeans to bio-fuel production, food
reserves are literally disappearing. Global food security, according to
FAO data, is at its lowest since 1972. Curiously that was just the time
that Henry Kissinger and the Nixon Administration engineered, in
cahoots with Cargill and ADM—the major backers of the ethanol scam
today—what was called The Great Grain Robbery, sale of huge volumes of
US grain to the Soviet Union in exchange for sales of record volumes of
Russian oil to the West. Both oil and corn prices rose by 1975 some
300-400% as a result. Just how that worked, I treated in detail in: A Century of War: Anglo-American Oil Politics.
a new element has replaced USSR grain demand and harvest shortfalls.
Bio-fuel demand, fed by US government subsidies is literally linking
food prices to oil prices. The scale of the subsidized bio-fuel
consumption has exploded so dramatically since the beginning of 2006
when the US Energy Policy Act of 2005 first began to impact crop
planting decisions, not only in the USA, that there is emerging a de
facto competition between people and cars for the same grains. Lester
Brown recently noted, “We’re looking at competition in the global
market between 800 million automobiles and the world’s two billion
poorest people for the same commodity, the same grains. We are now in a
new economic era where oil and food are interchangeable commodities
because we can convert grain, sugar cane, soybeans—anything—into fuel
for cars. In effect the price of oil is beginning to set the price of
In the mid-1970’s Secretary of State Henry
Kissinger, a protégé of the Rockefeller family and of its institutions
stated, “Control the oil and you control entire nations; control the
food and you control the people.” The same cast of characters who
brought the world the Iraq war, the global scramble to control oil, who
brought us patented genetically manipulated seeds and now Terminator
suicide seeds, and who cry about the “problem of world
over-population,” are now backing conversion of global grain production
to burn as fuel at a time of declining global grain reserves. That
alone should give pause for thought. As the popular saying goes, “Just
because you’re paranoid doesn’t mean they aren’t out to get you.”
F. William Engdahl is author of the forthcoming book, Seeds of Destruction: The Hidden Agenda of Genetic Manipulation, Global Research Publishing, and author of A Century of War: Anglo-American Oil Politics and the New World Order, Pluto Press. He may be reached via his website, www.engdahl.oilgeopolitics.net.
Be under no illusion that this will affect us all. The same policy is being pushed hard by the EU. They are calling for half the land across Europe used in wine production to be ripped out, and turned over to Bio Fuel production.
This will be followed quickly by the second part of the Great Global Warming Scam, GM crops.
For us here in the UK, Gordon Brown is part of the problem, not the solution.
No doubt Gordon Brown, following his declaration on Scottish supremacy has arranged for the Scots to have a monopoly on the production of Oats in the UK…..