In Lenexa and in Rome - Biofuels

Agriculture Under Secretary Tom Dorr visited The Packer's offices yesterday, primarily speaking of biofuels and food security. I'll have more on that session with Dorr and Vance Publishing editors in my column and on the blog later, but suffice to say he put up a spirited defense of the ethanol industry and warned about short sighted policy moves that could derail America's efforts to find alternative fuels.

The issue of biofuels impact on food prices and availability is looming large at the UN Food Security Summit in Rome. Agriculture Secretary Ed Schafer held a Q and A and I pulled out a couple of questions during the exchange. For one thing, I was shocked to hear Schafer's prediction of a 40% rise in global food prices in the next year; I thought I had been hearing numbers in the single digits, at least in the U.S. From the press conference:

REPORTER: Is it that biofuels is just one of many contributing factors? Could you have any figures for that for them? How many percent is that, is it contributes to the --

SEC. SCHAFER: Yes. We at the United States Department of Agriculture have plotted the long-term trends of price, yield, availability and consumption; and as we've looked at those long-term trends we are anticipating this year an over 40 percent increase in food price inflation globally, 43 percent approximately. Of that, we can identify 2 to 3 percent of that price increase that is driven by biofuels. The majority of course is energy, and the second largest piece, or about equal piece, is the increase in consumption around the world which is using up the production stocks. So we see, the figures that we are looking at show about a 3 percent, or a little under, effort on biofuels to actually drive up the inflation rate of food.

REPORTER: Stephanie Holmes from BBC News Website. You said that you think the biofuels only accounts for 2 to 3 percent of the price increases, but there are lots of estimates from respected think tanks that say it might account for up to a third. Would the U.S. consider a moratorium on biofuels? And also, they are not considered incredibly efficient; corn-based ethanol is not considered efficient as a means of making energy.

SEC. SCHAFER: Well, you know, it's one of the great things about the gathering of many countries at a place like this is to be able to reconcile numbers, to look at differences of opinion, to be able to come to some conclusion about what real numbers are or are not. As we have looked at the numbers, I think it's very clear that biofuels produce about 3 percent or a little under of the global inflation rate of food.

And beyond that, they produce many, many positive aspects. By biofuels, we are reducing the use of the high cost of oil today. It's been estimated that we have, through biofuel production, reduced a million barrels a day of oil and oil record high prices. That makes a lot of difference to a lot of people. Environmentally, they are better. There are things in gasoline, in the aromatics and things, that aren't as good as biofuels; they are better issue. And whether the energy created is more or less, is again a subject of debate. Many studies show that it is not [less energy created], that it is an efficient producer of energy. That as we've increased the fermenting process and increased the yields per acre of corn for instance as a feedstock, we have seen the cost of that energy go down and the efficiency go up.

So I am hoping that we can get together on some of these vast differences of opinion and come to some conclusions as to what's real versus what's emotional or socially driven or governmental driven. But you know, let's look at the numbers and see what we have.

REPORTER: Can I ask you, what's the subsidy the U.S. provides for its corn biofuel each year?

SEC. SCHAFER: We have currently a subsidy of [51] cents per gallon. That is going down now to [45] cents per gallon.

REPORTER: But as a total on an annual basis, how many millions of dollars?

SEC. SCHAFER: Oh, I don't know that number.

REPORTER: ... is that right?

SEC. SCHAFER: I don't know the number. Does anybody? We can get the number. We'll get the number for you. Thank you.

She's asking the total.