Institute Notes: A Dialogue on Overcoming Hunger and Poverty

Corn, Ethanol Production and Food Prices -- It's Not So Simple

The rapid escalation of food prices in the past few years, peaking in June/July of 2008, exacerbated hunger in the United States and around the world and prompted serious reflection on the causes. One contributor and source of controversy is the use of food – especially corn -- as feedstock for biofuel production. While some decry the dichotomy of “food versus fuel” and the impact of biofuel production on local economies and the environment, others argue that biofuels provide valuable opportunities to reduce dependence on fossil fuels and generate income for farmers without significantly raising food prices. A new Bread for the World Institute internal discussion paper explores these issues and finds that the reality is not so easily distilled to a slogan or a sound bite.

Consensus has emerged that global biofuel production accounted for 40 percent of the corn price increase in 2008. The translated into perhaps 10-15 percent of the total recorded increase in food prices in 2008, which was roughly 5 percent. Since, in the U.S., average spending on food is less than 6 percent of total household expenditure, that increase is relatively insignificant. This is not the case in poor countries where food expenditures constitute a much greater share of household income – as much as 80 percent in some cases.

The increased demand for corn as a feedstock for ethanol could continue to raise food prices if demand for corn, whether for animal feed or ethanol, increases at a faster pace than production. Higher petroleum prices, which increase farmers’ production costs, could also affect consumer food prices regardless of the pace of ethanol production, as would further displacement of soy cropland for corn.

Visiting the Poorest County in America

You can probably guess it’s going to be somewhere near an Indian reservation and in fact it is, the Crow Creek Reservation, in Buffalo County, South Dakota, per capita income $5,213. 

Poverty in Indian Country—if Pine Ridge in Todd County, South Dakota, not far from Crow Creek, is what comes to mind, it’s only because Pine Ridge is larger, the history is better known, and the troubles there received more attention. The truth is, it’s all a wash when comarping the SD reservations. None is much better off than another. 

It’s anybody’s guess what the real unemployment rate on the reservations are because most people have given up on looking for jobs. They don’t exist. On the Crow Creek reservation, there’s a small grocery, a convenience store, the post office, and of course the Casino. The school system, Indian Tribal Health and other social services offices employ the majority of the residents. 

The stark irony is that there’s so much beauty all around. It might not suit everyone’s taste in beauty, but if you like to meditate on big skies and wide-open spaces, it’s a pretty good place to get inside yourself (or outside). Riding across the reservation, I was listening to the radio just to kill the time and I had to turn it off because I could not sacrifice the pleasure of connecting with nature, my eyes and that adhesive stuff I think we call the soul. 

On Crow Creek, I visited with two people I’d met for the first time a couple of days earlier at a wind power conference in Rapid City. Crow Creek, Rosebud, Pine Ridge, Cheyenne River and Standing Rock reservations were all represented at the conference. There are few wind turbines spinning on these reservations currently, but if clean energy ever takes off, the Dakotas will be, as they are proud to tell you out here, the Saudi Arabia of wind power. There are technical barriers to cross, like transmission lines to move the power from the remote reservations to the population centers around the country, but everyone I met seems confident these problems can and will be solved imminently. And then the money will start flowing.