Ethanol is Rapidly Becoming One of the World's Biggest Eaters

Last Updated Jan 25, 2010 8:20 AM EST

When it's all piled together into heaping, rolling mountains by grain elevators, corn begins to create its own landscape: simultaneously yellow and orange, gathering in folds like sand dunes and about as numerous in its grains.

Such mountains are impressive, and so is the U.S. farming industry taken as a whole, producing as it does almost half a billion tons of corn a year. More surprising than the sheer amount: a quarter of our total grain production now goes to ethanol, after less than a decade of the industry ramping up.

That's according to the latest figures from the Department of Agriculture. The Guardian quotes another research group, the Earth Policy Institute, whose director bemoans the use of biofuels, saying that the grain could go to feeding 350 million of the world's poor (see the graph at right).

The figures are the latest to revive the perennial food vs fuel debate: should we be using food for our vehicles?

Unfortunately, the argument that the food should be moved instead to hungry mouths around the world is not the easiest to advance. The U.S. and other developed nations have had the capacity to feed the rest of the world for several decades. The economic impetus, by and large, has not been sufficient.

But using massive amounts of our food stock for fuel does impact the world food market, raising prices and -- perhaps vitally for the future -- drawing down stockpiles.

A little more than a week back, before the USDA's announcement, investor Jim Rogers told CNBC that food shortages are on the way because of the financial crisis. Reliance on a bulky biofuel industry will surely exacerbate any shortages that do develop.

Food shortages aren't guaranteed -- the industry has a way of slipping around such predictions -- but an alternate problem could crop up for biofuels, that of government funding. The corn ethanol industry survives on subsidies; meanwhile, the federal budget is not doing particularly well.

The more the corn ethanol industry grows, the more it looks like a liability. Worryingly, the industry, backed up by the agriculture lobby, wields significant political power and has a tendency to hide its own flaws. Hopefully, its sheer unwieldy size and influence will make politicians start trying to make more serious decisions about how much ethanol is enough.