1. Biofuels Impacts on Agriculture
and Food Security
Richard Perrin
Agricultural Economics

2. US biofuel development has been driven by
federal policies
VEETC - $0.50/gal, now $0.45/gal, to expire in Dec, 2011
Paid to motor fuel distributors when ethanol is
mixed with petroleum fuel
(A similar subsidy, of $1.00/gal, exists for biodiesel)
Renewable Fuels Standard (EISA, 2007)
Requires distributors to sell minimum quantities of biofuels
Why?
-Reduce greenhouse gas emissions
-Reduce dependence on foreign oil
-Foster rural development

3. Renewable Fuel Standard - Energy Indepence and
Security Act of 2007
40
Total RFS
35 Corn Ethanol
30 All Advanced Biofuels
billion gallons per year
Cellulosic
25
Biodiesel
20 Jan Corn Eth cap
15
10
5
0
2008 2010 2012 2014 2016 2018 2020 2022

4. Impacts of the ethanol industry
Percent of U.S. Corn Crop to Ethanol
50
45
40 grind capacity, Jan 1
35 actually ground
30
percent
25
20
15
10
5
0
1995 2000 2005 2010
crop year

5. Impacts of the ethanol industry
PRICES
$6
Ethanol, $/gal (FOB Omaha)
$5
Corn, $/bu
$4
Land, $/0.001ac (irrig, NE)
$3
$2
$1
$0
1998 2000 2002 2004 2006 2008 2010 2012

6. Impacts of the ethanol industry
World increase in grain production and use
300
coarse grains, world prod
250
corn, world prod
200 US ethanol grind
MMT
150
100
50
0
2002 2003 2004 2005 2006 2007 2008 2009 2010

7. Impacts of the ethanol industry
U.S. Corn Exports
3
3
2
billion bushels
2
as grain exports
as DDG exports
1
as ethanol exports
total
1
0
2000 2002 2004 2006 2008 2010

8. Impacts of the ethanol industry
Food Security Impact Today of a 40% grain price increase:
In the US:
Impact on food cost = 1.2% of food expenditures
= 0.12% of personal income
In one of the poor countries of the world:
Impact on food cost = 20% of food expenditures
= 15% of personal income

9. Impacts of the ethanol industry
Food Security Impact by 2050 ?
– We will need 70% more grain to satisfy population
and income increases with no increase in food prices
– Can we produce that and more biofuel also?
Not likely –rate of yield gains is slowing
So prices will rise, creating more food insecurity

10. But will the ethanol industry even
survive without federal policies?
Energy Value of Corn Based on Petroleum
Price
10
corn energy value w/blend credit
9
8 corn energy value w/o blend
credit
7
$/bu
6
5
4
3
2
1
0
20 40 60 80 100 120 140 160
Petroleum price, $/barrel, WTI

11. Concluding …
• Ethanol has been great for US crop producers
• Ethanol is not a threat to US corn exports
• Ethanol is not currently a serious threat to
Food Security
• But biofuels are a certainly a threat to Food
Security in the longer run
• Thank you for your attention