From the October 2007 Idaho Observer:

Buy Feed Corn: "They’ve stopped making it…"

It appears that the White House, with the aid and abetting of Congress and big oil, is going forward with yet another plan that foreshadows disastrous results for the American people. Ostensibly to decrease U.S. dependence on oil imports, the Bush administration is financing an expansion of the ethanol refining industry. Higher food costs are already being experienced as grains are sold to the highest bidders—government subsidizers. Food shortages, increased dependence on foreign oil, further destabilization of the economy and epidemic adverse health and environmental damage are also likely to result from President Bush's "20 in 10" program.

By F. William Engdahl

That bowl of Kellogg’s Cornflakes on the breakfast table and 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 1970s when prices for oil and food both exploded by several hundred percent in a matter of months. That mid-1970s price explosion led President Nixon to ask his old pal Arthur Burns, then Chairman of the Federal Reserve, to find a way to alter the consumer price index (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 it…"

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 and rice—that we have seen in three decades. Those three crops constitute almost 90 percent of all grains cultivated in the world.

Washington’s calculated, absurd plan

What’s driving this extraordinary change? The Bush administration is making a major public relations push to convince the world it has turned into a "better steward of the environment" by promoting the use of ethanol to replace gasoline as a fuel source.

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 U.S. gasoline use 20 percent 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 the of use of bio-ethanol for transport fuel. The president’s plan requires production of 35 billion gallons 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.

Insider incentives

To make certain it will happen, farmers and big agribusiness giants like Arthur Daniels Midland (ADM) get generous taxpayer subsidies to grow corn for fuel instead of food. Currently, ethanol producers get a subsidy in the U.S. 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 generous U.S. government subsidies to produce bio-ethanol fuels and the new legislative mandate, the U.S. refinery industry is investing heavily in building new special ethanol distilleries, similar to oil refineries, except they produce ethanol fuel.

Speculative expansion?

The number of ethanol refineries currently under construction exceeds the total number of oil refineries built in the U.S. 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 U.S. 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 allow 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 current 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 percent 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 percent of all cars have "flexi-fuel" engines able to switch from conventional gasoline to 100 percent 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 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 percent less energy per gallon than normal gasoline, translating into a loss in fuel economy per gallon of at least 25 percent over gasoline for an Ethanol E-85 percent blend.

The inconvenient truth

No advocate of the ethanol boondoggle addresses the huge social cost which is beginning to hit the dining room tables across the U.S., 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 as 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 percent of total corn ethanol production energy," meaning that huge new strains on natural gas supply will develop, pushing the prices of that commodity even 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 most dangerous threat to the planet’s food supply since the creation of patented genetically manipulated corn and crops.

U.S. farms become bio-fuel factories

The main reason U.S. and world grain prices are soaring in the past two years and are now pre-programmed to continue rising at a major pace, is the conversion of U.S. farmland into de facto bio-fuel factories.

• In 2006 U.S. farmland devoted to bio-fuel crops increased by 48 percent. 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 U.S. has risen 300 percent.

• In 2006 U.S. 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 U.S. is the world’s leading corn exporter, most going for animal feed to the EU and other countries. The traditional USDA statistics on acreage planted to corn is no longer a useful measure of food prices as all marginal acreage is going into bio-fuel drop production. The amount of acreage 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 and 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 percent over the past 12 months. This is just the start. The decline in grain reserves, the measure of food security in the 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 foreshadows exploding global grain prices, increased poverty and widespread malnutrition. The irony is that this ethanol revolution was ostensibly initiated to reduce U.S. dependence on imported oil but the reduction is expected to be minimal.

Prof. M.A. Altieri of Berkeley University estimates that dedicating all U.S. corn and soybean production acreage to bio-fuels would only meet 12 percent of gasoline and 6 percent of diesel needs. He notes that, although one-fifth of last year’s corn harvest went to bio-ethanol, it met a mere 3 percent of energy needs.

Additional consequences

But the farmland is being converted at a record pace. In 2006 more than 50 percent 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 U.S. some 41 percent 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 hectares 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 percent, a foolish demand that will set aside 18 percent 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 percent for bio-fuel—they use more energy than they produce. That translates into little threat to oil demand and huge profits for clever oil giants that re-profile themselves as "green energy" producers.

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 was awarded a $15 million research grant 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 end of "cheap food"

The bio-fuel market is booming like few others today. This all is a paradise for global agribusiness industrial companies like Cargill, ADM, Monsanto and 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? 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 U.S. government has been researching and developing bio-fuels since the 1970s. 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 percent since the end of 2000 when George W. Bush and Dick Halliburton Cheney made oil the central preoccupation of U.S. foreign policy. Last year, as bio-ethanol production first became a major market factor, corn prices rose by some 130 percent on the Chicago Board of Trade in 14 months.

It was commonly understood among commodities traders that, as 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 U.S. and Brazilian corn and soybeans to bio-fuel production, food reserves are literally disappearing.

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 U.S. grain to the Soviet Union in exchange for sales of record volumes of Russian oil to the West. By 1975, both oil and corn prices rose some 300-400 percent as a result.

Just how that worked, I examined in detail in "A Century of War: Anglo-American Oil Politics" (see ad this page).

Today a new element has replaced USSR grain demand and harvest shortfalls. Bio-fuel demand, fed by U.S. government subsidies, is literally linking food prices to oil prices.

The scale of subsidized bio-fuel production exploded dramatically early in 2006 when the U.S. Energy Policy Act of 2005 first began to impact crop planting decisions in the U.S. and elsewhere. A de facto competition between people and cars for the same grains is now emerging.

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-1970s 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 and the global scramble to control oil, who patented genetically manipulated seeds and 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, www.engdahl.oilgoepolitics.net7 pt