[NYTr] The Hidden Agenda Behind Bush's Biofuel Plan

[All the News That Doesn't Fit]

Counterpunch - Aug 13, 2007
http://www.counterpunch.org/engdahl08132007.html

Buy Feed Corn, They're About to Stop Making It

The Hidden Agenda Behind Bush's Biofuel Plan

By F. WILLIAM ENGDAHL

That bowl of Kellogg's Cornflakes on the breakfast table, or the
portion of pasta or corn tortillas, cheese or meat on the table is
going to rise in price over the coming months as sure as the sun rises
in the East. Welcome ladies and gentlemen to the new world food price
shock, conveniently timed to accompany our current world oil price
shock.

Curiously it's ominously similar in many respects to the early 1970's
when prices for oil and food both exploded by several hundred percent
in a matter of months. That mid-1970's price explosion led President
Nixon to ask his old pal, Arthur Burns, then Chairman of the Fed, to
find a way to alter the CPI inflation data to take attention away from
the rising prices. The result then was the now-commonplace publication
of the absurd "core inflation" CPI numbers--sans oil and food. Stephen
Roche was the young Fed economist who was assigned the statistical
manipulation job by Burns.

The late American satirist, Mark Twain once quipped, "Buy land: They've
stopped making it" Today we can say almost the same about corn or all
grains worldwide. The world is in the early months of the greatest
sustained rise in grain prices, for all major grains including maize,
wheat, rice that we have seen in three decades. Those three crops
constitute almost 90 per cent of all grains cultivated in the world.

What's driving this extraordinary change? Here things get pretty
interesting. The Bush Administration is making a major public relations
push to convince the world it has turned into a "better steward of the
environment." The problem is that many have fallen for the hype.

The center of his program, announced in his January State of the Union
Address is called '20 in 10', cutting US gasoline use 20 per cent by
2010. The official reason is to "reduce dependency on imported oil," as
well as cutting unwanted "greenhouse gas" emissions. That isn't the
case, but it makes good PR. Repeat it often enough and maybe most
people will believe it. Maybe they won't realize their taxpayer
subsidies to grow ethanol corn instead of feed corn are also driving
the price of their daily bread through the roof.

The heart of the plan is a huge, taxpayer subsidized expansion of use
of bio-ethanol for transport fuel. The President's plan requires
production of 35 billion gallons (about 133 billion liters) of ethanol
a year by 2017. Congress already mandated with the Energy Policy Act of
2005 that corn ethanol for fuel must rise from 4 billion gallons in
2006 to 7.5 billion in 2012. To make certain it will happen, farmers
and big agribusiness giants like ADM or David Rockefeller get generous
taxpayer subsidies to grow corn for fuel instead of food. Currently
ethanol producers get a subsidy in the US of 51 cents per gallon
ethanol paid to the blender, usually an oil company that blends it with
gasoline for sale.

As a result of the beautiful US Government subsidies to produce bio-
ethanol fuels, and the new legislative mandate, the US refinery
industry is investing big time in building new special ethanol
distilleries, similar to oil refineries, except they produce ethanol
fuel. The number currently under construction exceeds the total number
of oil refineries built in the US over the past 25 years. When finished
in the next 2-3 years the demand for corn and other grain to make
ethanol for car fuel will double from present levels.

Not just USA bio-ethanol. In March Bush met with Brazil's President to
sign a bilateral "Ethanol Pact" to cooperate in R&D of "next
generation" bio-fuel technologies like cellulosic ethanol from wood,
and joint cooperation in "stimulating" expansion of bio-fuels' use in
developing countries, especially in Central America, and creating a
"bio-fuels OPEC-like" cartel market with rules that allows formation of
a Western Hemisphere ethanol market.

In short, the use of farmland worldwide for bio-ethanol and other bio-
fuels_burning the food product rather than using it for human or animal
food_is being treated in Washington, Brazil and other major centers,
including the EU, as a major new growth industry.

Phony green arguments

Bio-fuel -- gasoline or fuel produced from refining food products -- is
being hyped as a solution to the controversial Global Warming problem.
Leaving aside the faked science and the political interests behind the
sudden hype about dangers of global warming, bio-fuels offer no net
positive benefits over oil even under best conditions. Its advocates
claim that present first generation bio-fuels "save up to 60per cent of
carbon emission." As well, amid rising oil prices at $75 per barrel for
Brent marker grades, governments such as Brazil's are frantic to
substitute homegrown bio-fuels for imported gasoline. In Brazil today
70 per cent of all cars have "flexi-fuel" engines able to switch from
conventional gasoline to 100per cent bio-fuel or any mix. Bio-fuel
production has become one of Brazil's major export industries as well.

The green claims for bio-fuel as a friendly and better fuel than
gasoline are at best dubious, if not outright fraudulent. Depending on
who runs the tests, ethanol has little if any effect on exhaust- pipe
emissions in current car models. It has significant emission, however,
of some toxins including formaldehyde and acetaldehyde, a suspected
neurotoxin which has been banned as carcinogenic in California.

Ethanol is not some benign substance as we are led to think from the
industry propaganda. It is highly corrosive to pipelines as well as to
seals and fuel systems of existing car or other gasoline engines. It
requires special new gas pumps. All that conversion costs money.

But the killer-diller about ethanol is that it holds at least 30 per
cent less energy per gallon than normal gasoline, translating into a
loss in fuel economy per gallon of at least 25 per cent over gasoline
for an Ethanol E-85per cent blend. No advocate of the ethanol
boondoggle addresses the huge social cost which is beginning to hit the
dining room tables across the US, Europe and the rest of the world.
Food prices are exploding as corn, soybeans and all cereal grain prices
are going through the roof because of the astronomical --
Congress-driven -- demand for corn to burn for bio-fuel.

This year the Massachusetts Institute of Technology issued a report
concluding that using corn-based ethanol instead of gasoline will have
no impact on greenhouse gas emissions, and would even expand fossil
fuel use due to increased demand for fertilizer and irrigation to
expand acreage of ethanol crops. And according to MIT "natural gas
consumption is 66per cent of total corn ethanol production energy,"
meaning huge new strains on natural gas supply, pushing prices there
higher.

The idea that the world can "grow" out of oil dependency with bio-
fuels is the PR hype being used to sell what is shaping up to be the
mist dangerous threat to the planet's food supply since creation of
patented genetically manipulated corn and crops.

US farms become bio-fuel factories

The main reason US and world grain prices are soaring in the past two
years and now pre-programmed to continue rising at a major pace, is the
conversion of US farmland to become de facto bio-fuel factories. In
2006 US farmland devoted to bio-fuel crops increased by 48 per cent.
None of that land was replaced for food crop cultivation. The tax
subsidies make it far too profitable to produce ethanol fuel.

Since 2001 the amount of maize used to produce bio-ethanol in the USA
has risen 300 per cent, with the trend increasingly going forward. In
fact, in 2006 US maize or corn crops for bio-fuel equaled the tonnage
of corn used for export. In 2007 it is estimated it will exceed the
corn for export by a hefty amount. The US is the world's leading corn
exporter, most going for animal feed to EU and other countries. The
traditional USDA statistics on acreage planted to corn is no longer a
useful metric of food prices as all marginal acreage is going for
bio-fuel growing. The amount available for animal and human feed is
actually declining.

Brazil and China are similarly switching from food to bio-fuels with
large swatches of land.

A result of the bio-fuel revolution in agriculture is that world
carryover or reserve stocks of grains have been plunging for six of the
past seven years. Carryover reserve stocks of all grains fell at the
end of 2006 to 57 days of consumption, the lowest level since 1972.
Little wonder that world grain prices rose 100 per cent over the past
12 months. This is just the start.

That decline in grain reserves, the measure of food security in event
of drought or harvest failure -- an increasingly common event in recent
years -- is pre-programmed to continue going as far ahead as the eye
can see. Assuming modest world population increase annually of some 70
million people over the coming decade, especially in the Indian
subcontinent and Africa, the stagnation or even decline in the tonnages
of feed corn or other feed grains including rice that is harvested
annually as growing amounts of bio-ethanol and other bio-fuels
displaces food grain, in fact means we are just getting started on the
greatest transformation of global agriculture since the introduction of
the agribusiness revolution with fertilizers and mechanized farming
after World War II. The difference is that this revolution is at the
expense of food production. That preprograms exploding global grain
prices, increased poverty and malnutrition. And the effect on gasoline
import demand will be minimal.

Prof. M.A. Altieri of Berkeley University estimates that dedicating all
USA corn and soybean production acreage to bio-fuels would only meet 12
per cent of gasoline and 6 per cent of diesel needs. He notes that
though one-fifth of last year's corn harvest went to bio-ethanol, it
met a mere 3 per cent of energy needs. But the farmland is converting
at a record pace. In 2006 more than 50 per cent of Iowa and South
Dakota corn went to ethanol refineries. Farmers across the Midwest,
desperate for more income after years of depressed corn prices, are
abandoning traditional crop rotation to grow exclusively soybeans or
corn with dramatic added impact on soil erosion and needs for added
chemical pesticides. In the US some 41 per cent of all herbicides used
are already applied to corn. Monsanto and other makers of glyphosate
herbicides like Roundup are smiling on the way to the bank.

Going global with bio-fuels

The Bush-Lula pact is just the start of a growing global rush to plant
crops for bio-fuel. Huge sugarcane, palm oil and soy plantations for
bio-fuel refining are taking over forests and grasslands in Brazil,
Argentina, Colombia, Ecuador and Paraguay. Soy cultivation has already
caused the deforestation of 21 million hectares in Brazil and 14
million hectares in Argentina, with no end in sight, as world grain
prices continue to rise. Soya is used for bio- diesel fuel.

China, desperate for energy sources, is a major player in bio-fuel
cultivation, reducing food crop acreage there as well. In the EU most
bio-diesel fuel is produced using rapeseed plants, a popular animal
feed. The result? Meat prices around the globe are rising and set to
continue rising as far ahead as the eye can see. The EU has a target
requiring minimum bio-fuel content of 10 per cent, a foolish demand
that will set aside 18 per cent of EU farmland to cultivate crops to be
burned as bio-fuel.

Big oil is also driving the bio-fuels bandwagon. Prof. David Pimentel
of Cornell University and other scientists claim that net energy output
from bio-ethanol fuel is less than the fossil fuel energy used to
produce the ethanol. Measuring all energy inputs to produce ethanol
from production of nitrogen fertilizer to energy needed to clean the
considerable waste from bio-fuel refineries, Pimintel's research showed
a net energy loss of 22 per cent for bio-fuel -- they use more energy
than they produce. That translates into little threat to oil demand and
huge profit for clever oil giants that re-profile themselves as "green
energy" producers.

So it's little wonder that ExxonMobil, Chevron and BP are all into
bio-fuels. This past May, BP announced the largest ever R&D grant to a
university, $500 million to the University of California-Berkeley to
fund BP-dictated R&D into alternative energy including bio-fuels.
Stanford's Global Climate and Energy Program got $100 million from
ExxonMobil; University of California-Davis got $25 million from Chevron
for its Bio-energy Research Group. Princeton University's Carbon
Mitigation Initiative takes $15 million from BP.

Lord Browne, the disgraced former CEO of BP declared in 2006, "The
world needs new technologies to maintain adequate supplies of energy
for the future. We believe bioscience can bring immense benefits to the
energy sector." The bio-fuel market is booming like few others today.
This all is a paradise for global agribusiness industrial companies
like Cargill, ADM and Monsanto, Syngenta.

All this, combined with severe weather problems in China, Australia,
Ukraine and large parts of the EU growing areas this harvest season,
guarantee that grain prices are set to explode further in coming months
and years. Some are gleefully reporting the end of the era of "cheap
food." With disappearing food security reserves and disappearing
acreage going to plant corn and grains for food, the bio- fuel
transformation will impact global food prices massively in coming years.

Another agenda behind Ethanol?

Uh Huh. The dramatic embrace of bio-fuels by the Bush Administration
since 2005 has clearly been the global driver for soaring grain and
food prices in the past 18 months. The evidence suggests this is no
accident of sloppy legislative preparation. The US Government has been
researching and developing bio-fuels since the 1970's. The bio-ethanol
architects did their homework we can be assured. It's increasingly
clear that the same people who brought us oil price inflation are now
deliberately creating parallel food price inflation. We have had a rise
in average oil prices of some 300 per cent since the end of 2000 when
George W. Bush and Dick Halliburton Cheney made oil the central
preoccupation of US foreign policy.

Last year, as bio-ethanol production first became a major market
factor, corn prices rose by some 130 per cent on the Chicago
commodities in 14 months. It was more than known when Congress and the
Bush Administration made their heavy push for bio-ethanol in 2005 that
world grain reserves had been declining at alarming levels for several
years at a time when global demand, driven especially by growing wealth
And increasing meat consumption in China, was rising.

As a result of the diversion of record acreages of US and Brazilian
corn and soybeans to bio-fuel production, food reserves are
disappearing. Global food security, according to FAO data, is at its
lowest since 1972. Curiously that was just the time that Henry
Kissinger and the Nixon Administration engineered, in cahoots with
Cargill and ADM_the major backers of the ethanol scam today_what was
called The Great Grain Robbery, sale of huge volumes of US grain to the
Soviet Union in exchange for sales of record volumes of Russian oil to
the West. Both oil and corn prices rose by 1975 some 300-400per cent as
a result. Just how that worked, I treated in detail in: A Century of
War: Anglo-American Oil Politics.

Today a new element has replaced USSR grain demand and harvest
shortfalls. Bio-fuel demand, fed by US government subsidies is
literally linking food prices to oil prices. The scale of the
subsidized bio-fuel consumption has exploded so dramatically since the
beginning of 2006 when the US Energy Policy Act of 2005 first began to
impact crop planting decisions, not only in the USA, that there is
emerging a de facto competition between people and cars for the same
grains. Lester Brown recently noted, "We're looking at competition in
the global market between 800 million automobiles and the world's two
billion poorest people for the same commodity, the same grains. We are
now in a new economic era where oil and food are interchangeable
commodities because we can convert grain, sugar cane,
soybeans_anything_into fuel for cars. In effect the price of oil is
beginning to set the price of food."

In the mid-1970's Secretary of State Henry Kissinger, a protégé of the
Rockefeller family and of its institutions stated, "Control the oil and
you control entire nations; control the food and you control the
people." The same cast of characters who brought the world the Iraq
war, the global scramble to control oil, who brought us patented
genetically manipulated seeds and now Terminator suicide seeds, and who
cry about the "problem of world over-population," are now backing
conversion of global grain production to burn as fuel at a time of
declining global grain reserves. That alone should give pause for
thought. As the popular saying goes, "Just because you're paranoid
doesn't mean they aren't out to get you."

[F. William Engdahl is author of the forthcoming book, "Seeds of
Destruction: The Hidden Agenda of Genetic Manipulation, Global Research
Publishing," and author of "A Century of War: Anglo-American Oil
Politics and the New World Order," Pluto Press. He may be reached via
his website, http://www.engdahl.oilgeopolitics.net.]