Last year, as bio-ethanol production first became a
major market factor, corn prices rose by some 130% on
the Chicago in 14 months....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.
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."
____________________
'Buy Feed Corn: They're about to stop making itŠ'
© F. William Engdahl * July 21 2007
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 price shock.
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 itŠ"
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 industry.
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
there higher.
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
The 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 actually declining.
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 the bank.
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 coming
years.
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.
Today 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 food."
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 book, Seeds
of Deception: The Hidden Agenda of Genetic
Manipulation, about to be released by 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,
http://www.engdahl.oilgeopolitics.net.
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