Corn ethanol demand may undermine food aid programs

The grim predictions of many economists have become an even grimmer reality for many of the world’s most desperately poor and hungry.

The growing demand for corn-derived ethanol has been a factor in driving food prices up and, as a result, the prospects for alleviating the perennial problem of world hunger further down.

The New York Times recently reported the United States, the world’s chief food donor, has purchased less than half of the level of food aid it did at the beginning of the new millennium, according to new data released by the U.S. Department of Agriculture.

It’s a far cry from previous decades, when food surpluses largely made possible by U.S. farm policy provided a cornucopia of cheap food not only for Americans but also for many food-deficit nations in the developing world.

“There’s no doubt farm policy in the last 50 years has resulted in surpluses in commodities like corn and wheat, which, in turn, have led to lower prices,” says Robert Goodman, an Alabama Cooperative Extension System economist and Auburn University associate professor of agricultural economics.

The lower prices made it possible for food aid programs to give away large quantities of food throughout Africa and much of the developing world, he says.

But spiking demand for renewable energy, particularly corn-derived ethanol, which currently dominates the U.S. biofuels sector, has altered all of that — something that likely will not change for the foreseeable future, Goodman says.

He believes these corn shortfalls and higher prices will persist as long as corn has to compete with other commodities for scarce cropland — commodities that also are fetching higher prices than a few years ago.

“We know now we can’t expand corn production enough so that prices will go down to the $1.80 or even $2.00 a bushel price they were before the ethanol boom,” Goodman says.

The higher food prices not only have reduced American food aid for the poor, but are even making it harder for the poorest people to buy food for themselves.

World hunger experts say that food aid spending will have to increase just to keep the current number of people fed. But such an increase doesn’t seem likely, judging from an appropriation bill currently under discussion in Congress, which doesn’t call for any major increases in the food aid budget.

While Goodman does not expect these rising food prices to be felt acutely in the United States, he fears the effect could be severe in many developing countries.

“Americans can afford to pay $4 a bushel for corn because we only spend between 15 and 17 percent of our annual income on food,” he says. “But most people in developing countries pay significantly more than that, so there’s no doubt it is going to hurt.”

Congress is considering changes to the food aid programs as part of the omnibus farm bill. Some economists and hunger experts believe some of the proposals under consideration actually could lead to improvements in the programs’ effectiveness. A Bush administration proposal, for example, would allow the federal government to use up to $300 million to purchase food in African countries, closer to hunger-plagued regions, rather than shipping the food directly from the United States on U.S.-flagged vessels.

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