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America's appetite for oil is growing. Corn-based ethanol is being viewed as the way to reduce the nation's addiction to oil by supplementing gasoline with domestic, renewable-based fuel.
The law of unintended consequences is at work in today's surging ethanol industry, but as the "law" goes, almost all human actions have at least one unintended consequence with unforeseen effects, and those effects are starting to unfold today.
In November 2006, the Ethanol Promotion Information Council commissioned an independent, third-party research firm to survey national consumer awareness and usage of ethanol. The national survey found that 57% of respondents believe it is important to add ethanol to gasoline because it lessens U.S. dependence on oil from foreign countries.
An increasing number of individuals are expressing concern over rushing into addressing domestic energy needs with short-term solutions. As Ted Seger, president of Farbest Foods, a major turkey producer, put it, "We support energy independence. However, we must recognize that it is a long haul, and no quick fix exists without hardships in other areas."
Food for thought
Very little grain corn is used for direct human consumption (Figure). Most of the corn produced in the U.S., approximately 56%, is used as livestock feed. The U.S. is a major player in the world corn trade market, with around 20% of the corn crop exported to other countries.
Other uses for corn such as cereal, sweeteners or starches make up less than 8% of total usage. Corn used as cereal accounted for only 4.8% of the 2005 corn crop.
Chad Hart, policy analyst at the Center for Agricultural & Rural Development, explained that a past U.S. Department of Agriculture-Economic Research Service study found that only 5% of the retail value of a loaf of bread or a box of corn-flake cereal is passed back to the farm.
"Even if corn prices double, the cost of a box of Cornflakes will not increase enough to cause a major impact, even though we're seeing major increases in farm gate corn prices," he said.
Meat prices could take a bigger hit if corn prices continue their upward climb. Hart said 30-50% of the retail value of meat is passed back to the farm. As feed costs increase, producers try to pass those costs on to consumers because of already thin margins in livestock markets.
For instance, a major turkey producer normally can produce a tom turkey for 33-37 cents/lb. live weight on average. Over the past year, those costs have increased to 43-45 cents because of surging feed costs.
Corn prices alone have doubled over the past 12 months, from $2.07 to $4.17. Every extra $1/bu. on corn equates to about a $1 extra cost per bird.
Year-ago levels to produce turkey breast meat was $1.30/lb. for raw meat, which does not include any cooking or processing. The new costs this year will be close to $1.60/lb. For a sandwich that uses a quarter-pound of turkey breast, your cost just increased 7-10 cents per sandwich, Seger explained.
Fuel versus food
A new report from Washington, D.C.-based Earth Policy Institute (EPI) said the grain it takes to fill a 25 gal. tank with ethanol just once will feed one person for a whole year. However, National Corn Growers Assn. (NCGA) chief executive officer Rick Tolman said the statement is far from the truth.
He explained that using 25 gal. of E85 (85% ethanol and 15% gasoline blend) is equivalent to 5 bu. of corn. Even at today's high corn prices of $4/bu., that's still only $20. "Who lives on $20 worth of food?" Tolman asked.
NCGA said in the emotion of the "food versus fuel" issue, there is a popular misconception that U.S. corn exports are used to feed humans in malnourished countries across the globe and that ethanol use will diminish exports to these countries.
"The truth is that the majority of corn exports from the U.S. are used to feed livestock in developed countries," NCGA said.
According to the U.N.'s Food & Agriculture Organization, there is more food per capita today on a global scale than ever before. Lack of infrastructure, access to capital and other issues are the more likely causes of hunger -- not scarcity of food, NCGA contended.
Ethanol's corn appetite
Ethanol production has grown steadily over the past 25 years; however, there has been a dramatic increase in recent years. Annual production capacity increased from 1.7 billion gallons in January 2000 to 4.3 billion gallons in January 2006 and to 6.0 billion gallons by Jan. 1, 2007, according to a commentary from the Council for Agricultural Science & Technology.
USDA chief economist Keith Collins said the nation is on track to produce up to 13 billion gallons of corn ethanol by 2009.
The EPI report estimates that the nation will need 139 million tons of corn, or half of the 2008 harvest projected by USDA, to feed the growing number of ethanol plants in the country.
Collins admitted that USDA ethanol estimates do not account for recent growth in planned plant constructions and expansions but added that EPI's estimated 15 billion gallons of corn ethanol by the end of 2008 is "too high."
EPI said converting the entire U.S. grain harvest to ethanol would satisfy only 16% of U.S. auto fuel needs. However, advocates of ethanol say it is not the goal of the industry to take all of U.S. corn production and convert it to ethanol.
Cellulosic ethanol -- made from biomass waste or other feedstocks that are not used for food -- is going to pick up where corn can't go in ethanol production, but it will take three to five years for full-scale cellulose commercial ethanol plants. | 
