If you’ve watched, heard or read the news lately, chances are you’ve come across some stories indicating that food costs are rising due to biofuel production siphoning off edible oil supplies. Some misinformed newspaper columnists and talk-show hosts have fingered ethanol and biodiesel as the culprits. While it’s true that these two renewable fuels utilize some corn for ethanol and soybeans, in addition to other oilseeds, for biodiesel, the reality is that feed and use in vegetable oils for food are still the top uses. And, in the case of soy biodiesel, it can actually help lower food costs. And increased crush for oil for soy biodiesel provides more soybean meal for feed, which results in more chicken, turkey, pork and fish to help feed us and the rest of world.
For brevity’s sake, let’s look at soy biodiesel as an example related to food and feed.
Historically, surplus soybean oil supplies dragged down the overall price of soybeans. There was, and still is, plenty of soybean oil for meeting the demands of food production. But the surplus needed to be utilized. That’s why the soybean checkoff helped develop the U.S. biodiesel industry through research funding to find new uses for soybean oil. One of those uses was soy biodiesel. Over time, the industry grew and provided great new opportunities for U.S. soybean farmers, not to mention increased energy security and environmental benefits for us all. This helped boost demand for soybeans, but not at the risk of sacrificing food use.
So where is the soybean oil going?
In reality, food production is still the number one use for soybean oil worldwide. In the United States, 87 percent of domestic soybean oil still goes to food production. Biodiesel is not the number one customer for soybean oil – food production is.
Let’s not forget the other major component of soybeans – soybean meal. A soybean checkoff-funded study shows the increased demand for soybean oil for all of its uses can lead to an increase in the amount of soybean meal available, a protein-rich source for feed.
So if food production is still the number one customer, what are the contributing factors to rising food costs?
It’s not just one thing or one event that has caused food prices to rise. In reality, it’s a combination of issues. U.S. Department of Agriculture (USDA) figures show transportation and energy combined rank high as components of retail food costs. In the last 14 months, the price of petroleum has doubled. And a recent Goldman Sachs report suggests that the price of crude oil could reach as high as $150 to $200 a barrel. These high petroleum prices and energy sources directly impact transportation costs for everything, including food.
There are other factors at play in the food, feed and fuel issue as well. An analysis by the American Farm Bureau Federation shows that the weakened U.S. dollar, unfavorable weather conditions in food-producing regions outside the United States, increased speculation in the commodities futures markets and a growing global population yearning for meat have all contributed. All of these factors have increased demand for basic commodities, including soy.
The question then becomes how can soy biodiesel help lower costs for food? Here’s how:
In March, Merrill Lynch commodity strategist Francisco Blanch said that oil and gasoline prices would be about 15 percent higher if biofuel producers were not increasing their output. Those biofuels include soy biodiesel, which helps to keep oil and petroleum diesel prices in check. Without it, and other biofuels, the predicted 15 percent higher energy costs would be passed on to diesel users, potentially making food prices even higher. And, in some states, such as Illinois, state tax incentives on biodiesel can help to keep the price of biodiesel blends at or below the price of on-road petroleum diesel.
Soy biodiesel has more benefits, too. It also performs well, demonstrating horsepower, torque and haulage rates similar to petroleum diesel fuel. A soy biodiesel blend of just 2 percent soy biodiesel and 98 percent petroleum diesel, known as B2, can increase fuel lubricity by as much as 66 percent. This helps reduce engine wear and extend engine life. And biodiesel offers environmental benefits through reduced emissions. A study from the U.S. Environmental Protection Agency indicates exhaust emissions of carbon monoxide from biodiesel are on average 48 percent lower than carbon monoxide emissions from diesel. To view the EPA’s full report, visit www.epa.gov/otaq/models/analysis/biodsl/p02001.pdf . Lower emissions are better for the environment and human health.
The good news in all of this is that U.S. soybean farmers will continue to produce enough soybeans to meet the demands for food, feed and fuel. Farmers still focus on feeding the world first – they always have and always will. Technology, including biotechnology, along with the continued efforts of the soybean checkoff will help ensure production output remains high. In the end, realistically speaking, it’s food, feed and fuel, not one without the other.
Saturday, September 20, 2008 8:46 AM by: Vilson Ambrozi
Com absoluta certeza,para cada acre destinado ao plantio de milho nos EUA para fins energeticos have´ra em outra parte do mundo outro acre para substitui-lo,é so uma questão de retorno dos preços normais sem os fartos e maleficos subsidios que governos de paizes ricos destinam ao agronegocio,Parabens ao governo e aos agricultores americanos que ao invés de subsidios peferiram ,o uso de seus produtos agro,para competir com OPEP.
Friday, July 25, 2008 11:08 PM by: Anonymous
I appreciate your view of Soy Diesel and it's benefits to animal feeds via meal from additional crushing. However, your arguement that biofuels aren't the source of food inflation since animal feed and food is still a larger use, is simply bad economic reasoning. The facts are that corn ethanol makes up 67% of world growth in corn demand as it's projected use grows over the next 4 years. This is the driver of food inflation without a doubt. If it is curtailed prices will come in line and the artificial demand from the corn ethanol boondoggle will be over.
