(Fortune Magazine) -- The growing myth that corn is a cure-all for our energy woes is leading us toward a potentially dangerous global fight for food. While crop-based ethanol -- the latest craze in alternative energy -- promises a guilt-free way to keep our gas tanks full, the reality is that overuse of our agricultural resources could have consequences even more drastic than, say, being deprived of our SUVs. It could leave much of the world hungry.
We are facing an epic competition between the 800 million motorists who want to protect their mobility and the two billion poorest people in the world who simply want to survive. In effect, supermarkets and service stations are now competing for the same resources.
This year cars, not people, will claim most of the increase in world grain consumption. The problem is simple: It takes a whole lot of agricultural produce to create a modest amount of automotive fuel.
The grain required to fill a 25-gallon SUV gas tank with ethanol, for instance, could feed one person for a year. If today's entire U.S. grain harvest were converted into fuel for cars, it would still satisfy less than one-sixth of U.S. demand.
Worldwide increase in grain consumption
The U.S. Department of Agriculture reports that world grain consumption will increase by 20 million tons this year, roughly one percent. Of that, 14 million tons will be used to fuel cars in the U.S., leaving only six million tons to cover the world's growing food needs.
Already commodity prices are rising. Sugar prices have doubled over the past 18 months (driven in part by Brazil's use of sugar cane for fuel), and world corn and wheat prices are up one-fourth so far this year.
For the world's poorest people, many of whom spend half or more of their income on food, rising grain prices can quickly become life threatening.
Once stimulated solely by government subsidies, biofuel production is now being driven largely by the runaway price of oil. Many food commodities, including corn, wheat, rice, soybeans and sugar cane, can be converted into fuel; thus the food and energy economies are beginning to merge.
The market is setting the price for farm commodities at their oil-equivalent value. As the price of oil climbs, so will the price of food.
In some U.S. Cornbelt states, ethanol distilleries are taking over the corn supply. In Iowa, 25 ethanol plants are operating, four are under construction, and another 26 are planned.
Iowa State University economist Bob Wisner observes that if all those plants are built, distilleries would use the entire Iowa corn harvest. In South Dakota, ethanol distilleries are already claiming over half that state's crop.
The key to lessening demand for grain is to commercialize ethanol production from cellulosic materials such as switchgrass or poplar trees, a prospect that is at least five years away.
Malaysia, the leading exporter of palm oil, is emerging as the biofuel leader in Asia. But after approving 32 biodiesel refineries within the past 15 months, it recently suspended further licensing while it assesses the adequacy of its palm oil supplies. Fast-rising global demand for palm oil for both food and biodiesel purposes, coupled with rising domestic needs, has the government concerned that there will not be enough to go around.
Less costly alternatives
There are truly guilt-free alternatives to using food-based fuels. The equivalent of the three percent of U.S. automotive fuel supplies coming from ethanol could be achieved several times over -- and at a fraction of the cost -- by raising auto fuel-efficiency standards by 20 percent. (Unfortunately Detroit has resisted this, preferring to produce flex-fuel vehicles that will burn either gasoline or ethanol.)
Or what if we shifted to gas-electric hybrid plug-in cars over the next decade, powering short-distance driving, such as the daily commute or grocery shopping, with electricity?
By investing not in hundreds of wind farms, as we now are, but rather in thousands of them to feed cheap electricity into the grid, the U.S. could have cars running primarily on wind energy, and at the gasoline equivalent of less than $1 a gallon.
Clearly, solutions exist. The world desperately needs a strategy to deal with the emerging food-fuel battle. As the world's leading grain producer and exporter, as well as its largest producer of ethanol, the U.S. is in the driver's seat.