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Questioning the Relationship Between Biofuels and Food Costs

April 17, 2008
A new study released by Texas A&M’s Agricultural and Food Policy Center undermines one of the key assumptions used in the studies that attributed a huge “carbon debt” to biofuels.
The assumption used by Searchinger et al. is that biofuel production increases the cost of all commodity grains, encouraging countries to convert additional land – such as rainforest, peat land, and savannah – to agricultural production.

The Searchinger paper calculates that agricultural production will have to increase in other parts of the world to compensate for U.S. production of biofuel using a model of world agricultural markets developed by Iowa State University’s Center for Agricultural and Rural Development (CARD) and the Food and Agricultural Policy Research Institute (FAPRI).

But other agricultural economists have recalculated the data using the same model and have drawn different conclusions. Richard K. Perrin, Jim Roberts Professor at the University of Nebraska-Lincoln, for instance, notes that “recent grain price increases are higher than could be expected from recent ethanol increases alone."

The Texas A&M study now shows that higher energy costs are the key to changes in the U.S. agricultural industry and economy. In fact, the study says, higher agricultural production costs –- higher energy costs for tilling, harvesting and transporting –- will tend to reduce acreage. And U.S. farmers have indicated they will reduce acreage for corn this year, according to the USDA. They will look toward ways to increase yields per acre to maintain production.

Searchinger’s calculation of a “carbon debt” for biofuels ignored the contribution of high oil prices to conversion of rainforest and savannah to agricultural production. If oil prices carry even some of the carbon debt, it refutes his contention that, “Strange as it sounds, we're better off growing food and drilling for oil.”

The Texas A&M study goes on to say that relaxing the RFS would not significantly lower corn prices. Demand for biofuels outstripped the previous RFS. And demand for ethanol as a gasoline extender will continue to outstrip the current RFS. A Merrill Lynch analyst recently noted that oil and gasoline prices would be 15 percent higher than they are now without the use of biofuels