Here's a biofuel conundrum. The two most widely-used feedstocks for producing ethanol in the world today are corn, mostly in the United States, and sugarcane, mostly in Brazil. Ethanol made from sugarcane is cheaper, more energy-efficient, and less destructive of the environment than corn. But while the price of corn has spiked over the past 18 months, sending shockwaves through a myriad of downstream food products, the price of sugar has been on a steady downward trend for exactly the same period of time. (Thanks to BioPact for the tip.)
Production of sugar is outstripping demand, largely due to burgeoning supplies from India. India is the second largest producer of sugar in the world, after Brazil. Production this year is expected to hit a record 28 million tons, and jump by another two million tons in 2008.
The obvious impact of rising corn prices on the cost of food has made the "food versus fuel" equation a potent rhetorical tool for opponents of biofuels. But the falling price of sugar demonstrates that even with Brazil pumping out an Amazonian flood of sugarcane-derived ethanol, the food vs. fuel polarity is not necessarily a law of nature. Instead it's a function of how markets are rigged. If the U.S. really wanted to reduce its dependence on overseas oil via increased consumption of biofuels, the cheapest way to go about it would be to remove the tariffs that currently restrict the importation of foreign sugar and foreign ethanol into the United States.
Of course while this would make Indian and Brazilian farmers ecstatic, and possibly result in a net gain for the global economy, it would enrage American corn farmers and induce apoplectic fits in the handful of American sugar barons who are currently guaranteed high prices for their sugar, in blatant defiance of free trade rhetoric and the dynamics of world sugar supply and demand. And since Indians and Brazilians don't vote in American elections, their interests are unlikely to be high on the priority lists of American politicians.
To the contrary -- the American sugar industry, unsatisfied with price supports that increase the cost of a myriad of downstream food products that include sugar as an ingredient, is lobbying the U.S. government to guarantee even higher prices and to allow the conversion of American sugar beets and sugarcane into ethanol. This flies in the face of USDA studies suggesting that ethanol made from American sugar wouldn't be particularly cost-competitive. But the House of Representatives is taking the matter under consideration.
Given how quickly corn prices have shifted upwards in the past year and a half, one must concede that is entirely possible that the same might come to pass for sugar, with or without U.S. government help. If India takes its sugar surplus and starts converting it to ethanol for domestic use, perhaps sugar is destined to join the rest of the world's commodities in their 21st century stratospheric boom. But for now, Americans pay more for their sugar and their ethanol than they need to. Call it the food vs. fools conundrum.
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