Food or Fuel:Where Does Vegetable Oil Have More Value?

It's a subject that has come up over and over: Will the growth of the biofuels industry take food out of the mouths of the world's hungry? While experts say it will take more time for the truth to unfold, it's certainly not as simple-or as sinister-than the picture some paint.
By Holly Jessen | September 01, 2006
Security, environment, farming: These three words are central to the magic mantra of the rapidly growing biofuels industry. Each is inextricably linked to a unique and politically powerful reason to stand behind the movement. Along with the growing acceptance and positive national attention biofuels now receive, however, comes considerably different reactions from the masses-reluctance, apprehension, fear. That is, a significant number people genuinely believe biofuels are hurting the world more than they're helping it.

Put all those unanswered emissions questions aside for now. This is a whole separate issue-a squabble over the legitimacy of a debate known as "food versus fuel."

The question at hand is this: Some biofuels opponents believe the biofuels industries could grow so big, and consume such a large percentage of available land and crops that the world's food supply would be affected. They say the situation could get so bad, in fact, that hunger levels in developing countries around the globe could rise as a direct result.

Fortunately, it's not necessary to agree with this bleak assessment in order to fairly address questions related to it. Will biodiesel plants eventually demand so much of the U.S. soybean crop that there won't be any left for food production or export? Overseas, will all the rapeseed grown in Europe, for example, be turned into fuel, leaving none left to make food products like margarine? The answer today, of course, is no. Whether it could happen in the future, however, is a question that simply can't be ignored.
With all the national attention on biofuels lately, it's only logical that people start asking questions, says Neil Caskey, director of industry and public relations for the American Soybean Association (ASA). It's not necessarily a bad thing. "I think folks are beginning to ask questions and really taking note of the renewable fuels industry-and I think that's a good thing," he says.

At press time, there were two conferences scheduled for the purpose of tackling that exact topic. The Soya Summit 2006: Food and Energy for the 21st Century, is scheduled for Sept. 18-20 in St. Louis, Mo. In March, the Edible Oil organization plans to have a conference, titled, "Sustainability of Oils and Fats to Meet Global Demand on Food and Biodiesel" in Seville, Spain.

The Soya Summit is organized by Soyatech, a subsidiary of HighQuest Partners (see Talking Point, page 70). The goal of the summit is to get professionals from the food, agriculture, biofuels and larger energy complex together to talk about the challenges and opportunities presented by the growth of the biofuels industry, says Jacob Golbitz, director of research at High Quest Partners. Of primary concern is that burning question: Will reallocating more food resources, such as corn, soybeans and rapeseed, for fuel production potentially increase world hunger? While that situation isn't happening now, it is a theoretical possibility, Golbitz tells Biodiesel Magazine.

At this point, no one knows for sure what will happen, however. "This is potentially such a profound change that it's really hard to see how it will work out," Golbitz says.

The Food and Agriculture Organization of the United Nations (FAO), which is also carefully studying the issue, agrees that there's no definitive answer to the question right now. What is known so far is that it's an issue that can't be generalized, according to Gustavo Best, FAO senior energy coordinator. Biofuels production is going to have different effects in different areas of the world. "You cannot say all over the world it is positive, or all over the world it is negative," Best tells Biodiesel Magazine.

Biodiesel Under the Microscope
Joe Jobe, CEO of the National Biodiesel Board, sees the biofuel as benefiting the food supply, not harming it. Utilizing surplus agricultural commodities, such as soybean oil, enhances food supply and adds value to agriculture economics.

Several comprehensive studies on biodiesel have been conducted in the past few years, Jobe says. The studies, though they used different economic models, had similar conclusions. Using fats and oils to a greater degree for biodiesel production increases the value farmers get for their crops. It also has the effect of lowering the cost of protein meal, making domestic livestock feed cheaper and more competitive in international markets for food and feed. "Not only does this allow farmers to more profitably supply global food markets, it may have the effect of increasing ag processing in the United States," Jobe says.

It's a misconception that U.S. soybean production will not be able to grow to fill the tall orders of both food and fuel, Caskey says. A host of new technologies, including biotechnology, better crop protection, farm management systems and more, will help soybean farmers keep producing more soybeans on the same amount of land in the future. "At the ASA, we don't view it as an 'either-or' proposition," Caskey says. "We know that we can provide enough feed for animal agriculture, food for people and fuel for consumers."

Along with the food market, exports are also critically important to soybean farmers. The industry typically exports about half the value of its yearly crop-about $9 billion last year, according to Caskey. The ASA doesn't lean more strongly toward promoting either the soy oil or export markets. "Those are both markets we are going to aggressively fight to defend and expand, not at the expense of the other, but together," Caskey says.

On the other hand, Golbitz disagrees. With the way the industry is looking to expand production, he predicts a shortfall of soybean supply for biodiesel production-probably sooner rather than later. He sees the industry eventually turning to imported palm oil and rapeseed oil. "I would not be surprised to see us become an importer of soy oil," he tells Biodiesel Magazine.

Golbitz shot down the misconception that the increased use of food resources is the only thing that's driving rising prices, however. There are a lot of factors putting general pressure on commodity prices, including energy prices, for example. "At least for right now, we're kind of a long way from biofuels determining prices because it's such a small industry compared to the energy industry and the agricultural industry," Golbitz says. "Maybe 10 years from now, but not now."

Media Coverage
The food versus fuel debate is something that has cropped up in the news repeatedly. So far, those engaged in it haven't exactly reached a consensus-even among executives from companies involved in the biofuels business.

Agribusiness giants Archer Daniels Midland Co. (ADM) and Cargill Inc. sparred over the food versus fuel debate through the mainstream media in May. It started when The Associated Press reported that Warren Staley, chairman and CEO of Cargill, said agricultural land should be used to produce food, feed and, lastly, fuel. G. Allen Andreas, chairman of ADM's board of directors, responded the next day, saying there is plenty of capacity in the world to grow food.

Bill Brady, Cargill spokesman, tells Biodiesel Magazine that from a general strategic standpoint, the company's position on biodiesel is the same as its view of ethanol. Cargill recognizes that biofuels have a role to play in meeting national energy needs. However, even if the entire U.S. soybean crop were converted to biodiesel, it would amount to less than 5 percent of the total current diesel use.

Overall, the company wants advocates for caution and rationality. "We have publicly cautioned against over-exuberance and have called attention to the challenges of meeting both food and fuel needs in the event of a short crop," Brady says.
At press time, ADM had not fulfilled requests for an interview on the subject.

Yet another corporate executive was heard chiming in on the debate in July when The Associated Press quoted Eric G. Holthusen of Royal Dutch Shell saying that turning food into fuel was "morally inappropriate." In a subsequent newspaper article, another Shell representative distanced the group from the comment made by Holthusen, an Asia/Pacific fuels technology manager.

Steve Brown, a Shell spokesman who is familiar with commercial aspects of biofuels, tells Biodiesel Magazine that Holthusen's comment was "unfortunate" and not fully representative of Shell's policy on ethanol or biodiesel.

Shell, which handles 3 billion liters (800 million gallons) of biofuels yearly, mostly in the United States and Brazil, is concerned with providing its customers with sufficient energy supplies in a sustainable way. "There is no one solution to the world's demand for energy, but biofuels are one part of that package," Brown says.

The Margarine Factor
While the debate remains hot in other European Union (EU) countries, food and fuel producers in Germany have near-total agreement on the issue, according to Petra Sprick, managing director of the Biofuels Industry Association, a lobbying organization in Germany. After a long dialogue with the food industry, particularly margarine producers, earlier controversy over the subject has died out. "The food industry has learned, meanwhile, that they cannot kill the bio-industry movement," Sprick says.

Perhaps it makes sense that Germany has come to terms with the biodiesel industry before others in the EU. The country is the EU's largest biodiesel producer. In 2005, 501 million gallons of biodiesel were produced there-behind only France with 147 million gallons, according to the European Biodiesel Board.

Natural marketplace dynamics help ensure there will be enough rapeseed supply for the food industry, which is better situated to handle rapeseed price increases. "There will always be enough rapeseed oil for the food industry," she says, adding that, that's generally understood now in Germany.

Currently, the food industry uses only 600,000 metric tons of rapeseed oil yearly, compared to 1.8 million metric tons for biodiesel production. However, neither industry needs to be totally dependant on that one feedstock. Sunflower and palm oils, for example, can be suitable for food use as well, Sprick says. Biodiesel producers could also use soy or palm oil, though current legislation-and fuel quality specifications-favor rapeseed oil. Together with the German food industry, the Biofuels Industry Association supports allowing producers to use a wider variety of feedstocks, including imported supplies. Both industries are opposed to legislatively dictating what feedstocks should and shouldn't be used as biofuel feedstocks, Sprick says. Suppressing the biofuels industry to keep prices down for other industries wouldn't be fair. "It's a competition which we need to have in the marketplace," she says.

The Real Culprit
Food First, a California-based organization with the goal to obtain access to food for humans worldwide, doesn't see biofuels as the bad guy, according to Marilyn Borchardt, development director. While many people don't have the finances or resources to purchase or grow food, including 11 percent of Americans, ethanol or biodiesel production isn't the problem. "We know that there is more than enough food produced in the world to make everyone fat," she says.

Hunger is caused primarily by nations run by governments that haven't made it a priority to make sure all of their citizens have access to food. For example, some African nations have exported food while their own citizens have starved during famines, Sprick says.

Furthermore, Food First views the U.S. food-aid program as a costly, inefficient system that perpetuates the problem. By sending food rather than finances like other countries, inexpensive food supplies are dumped on the market, putting farmers in those countries out of business. "All that public fighting about [how] there's not going to be enough food, it's really about profits, nothing more than that," Borchardt says.

Holly Jessen is a Biodiesel Magazine staff writer. Reach her at [email protected] or (701) 746-8385.
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