The US and its rising Ethanol Production
Abstract:
In the 2007 State of the Union address,1 US President Bush called on the country to produce 35 billion gallons of biofuel a year by 2017. President Bush’s proposal to increase biofuel production will dramatically increase the volume of corn required by the US ethanol industry and will translate into higher prices for both processed and stable foods around the world. Consequently, corn-based ethanol will continue to tie oil and food prices together in ways that will profoundly upset the relationship between food producers and consumers, with potentially devastating implications for global poverty. In addition, it will only replace a small percentage of US fuel consumption.
ANALYSIS:
1. The US Ethanol Market
2. Impacts for the US and world Agriculture
3. Increased US corn (food) prices and its effects
4. US Ethanol production- dependence oil and environmental benefits
5. Conclusion
Table of Contents
1. EVENT
2. SIGNIFICANCE
3. ANALYSIS:
3.1 The US Ethanol Market
4. Impacts for the US and world Agriculture
5. Increased US corn (food) prices and its effects
6. US Ethanol production- dependence oil and environmental benefits
7. CONCLUSION:
Research Objectives and Core Themes
The study examines the implications of the United States' push for increased biofuel production, specifically focusing on how rising demand for corn-based ethanol impacts global food prices, agricultural markets, and international food security.
- The economic drivers and legislative support behind the US ethanol industry.
- Consequences of increased corn demand on global food supply chains and price stability.
- Economic pressures on livestock producers and the resulting impact on food costs.
- The relationship between ethanol production, oil price dependence, and trade policy.
- The potential for adverse effects on poverty levels in developing countries.
Excerpt from the Publication
Increased US corn (food) prices and its effects
Moreover, Bush’s proposal for the coming years to produce 35 billion gallons of renewable fuel (which will be mostly corn-based ethanol) a year by 2017, supports the latest prediction from the International Food Policy Research Institute in Washington, which predicts that the rapid increase in US and global corn-based ethanol production will push global corn prices up by 20% by 2010 and 41% by 2020. Consequently, this will profoundly upset not only consumers in the US - where already the subsidies on ethanol cost taxpayers between $5.5 and $7.3 billion a year – but also in other parts of the world, mainly developing countries.
The consequences of high corn prices were already visible in Mexico in late 2006 when the price of tortilla flour in Mexico more than doubled. There is almost universal consensus in Mexico that higher demand for ethanol, particularly in the US, is at the root of the increase of corn and tortilla prices. Moreover, the high corn price (stable grains in general) will also have devastating effects on consumers in poor developing countries. Regarding the latter, the World Bank has estimated that 1.1 billion people had consumption levels below $1 a day. Additionally, most of the 82 low income countries with food deficits are also net oil importers. Therefore, even marginal increases in the cost of stable grains and remaining high oil prices could have devastating effects for the most vulnerable people.
Summary of Chapters
EVENT: Outlines the 2007 State of the Union address in which President Bush proposed a significant increase in annual biofuel production.
SIGNIFICANCE: Discusses how the push for biofuel expansion links oil and food prices, creating risks for global poverty.
ANALYSIS:: Provides an overview of the US ethanol market, tracing its growth since the 1970s and the impact of federal policy and oil prices.
The US Ethanol Market: Details the historical development of ethanol as a response to oil shocks and the subsequent reliance on subsidies.
Impacts for the US and world Agriculture: Examines how increased demand for ethanol forces land conversion and impacts global trade and livestock production costs.
Increased US corn (food) prices and its effects: Analyzes the link between US ethanol targets and global food inflation, citing the impact on staple crops like corn in countries such as Mexico.
US Ethanol production- dependence oil and environmental benefits: Explores the dilemma of using ethanol to reduce oil dependence while managing domestic protectionism and limited environmental gains.
CONCLUSION:: Summarizes the finding that the drive for energy independence has created dependencies on subsidies and oil prices, causing negative repercussions for global food security.
Keywords
Biofuel, Ethanol, US Corn Industry, Food Prices, Energy Policy, Agricultural Economics, Global Poverty, Renewable Fuels, Commodity Markets, Trade Protectionism, Livestock Production, Sustainability, Energy Independence, Food Security, Subsidies
Frequently Asked Questions
What is the primary focus of this publication?
This document analyzes the impact of the United States' legislative push for increased ethanol production on the global agricultural sector and food security.
What are the central themes discussed in the text?
The key themes include the economics of corn production, the correlation between fuel and food prices, the role of federal subsidies, and the trade implications of biofuels.
What is the main research question or objective?
The objective is to evaluate whether the drive for US energy independence via corn-based ethanol creates negative downstream effects for global food affordability and agricultural stability.
What scientific or analytical approach is used?
The document uses a market analysis approach, evaluating trends in energy prices, corn yields, global trade data, and policy impacts to assess future consequences.
What is covered in the main body of the text?
The main body covers the history of the US ethanol market, the mechanics of agricultural land use, the impact on livestock feed costs, and the vulnerabilities of developing nations to price spikes.
Which keywords best characterize this document?
Key terms include Biofuel, Ethanol, Food Prices, Energy Independence, and Agricultural Economics.
How does US ethanol production affect Mexican consumers specifically?
The text notes that the high demand for corn in the US has contributed to significantly higher tortilla prices in Mexico, directly affecting the primary protein source for many low-income households.
What is the author's conclusion regarding the trade-off between energy and food?
The author concludes that current ethanol policies have created a damaging cycle where energy independence is pursued at the cost of global food price stability and increased poverty in developing nations.
- Quote paper
- Philip Elsen (Author), 2007, The US and its rising Ethanol Production, Munich, GRIN Verlag, https://www.grin.com/document/137708
