Siphoning Off Corn to Fuel Our Cars

Erwin Johnson picks up a clump of the dark, rich soil that he has farmed for 35 years, like his father and grandfather before him. In a few months, this flat expanse of northern Iowa will be crowded with corn ready to be trucked to market.

A year ago, that market got a little closer -- and a lot better. Instead of sending his corn to a barge company to be shipped down the Mississippi River for export, Johnson now loads it into an open truck and sends it two miles up the gravel road to a hulking new ethanol distillery that he can see from his field. The plant is paying him $5.50 or more a bushel, more than twice as much as Johnson could get just a couple of years ago.

"This is a fantastic time to be farming," Johnson says. "I'm 65, but I can't quit now."

Across the country, ethanol plants are swallowing more and more of the nation's corn crop. This year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. That has helped farmers like Johnson, but it has boosted demand -- and prices -- for corn at the same time global grain demand is growing.

And it has linked food and fuel prices just as oil is rising to new records, pulling up the price of anything that can be poured into a gasoline tank. "The price of grain is now directly tied to the price of oil," says Lester Brown, president of Earth Policy Institute, a Washington research group. "We used to have a grain economy and a fuel economy. But now they're beginning to fuse."

Not everyone thinks it's fantastic. People who use corn to feed cattle, hogs and chickens are being squeezed by high corn prices. On Monday, Tyson Foods reported its first loss in six quarters and said that its corn and soybean costs would increase by $600 million this year. Those who are able, such as egg producers, are passing those high corn costs along to consumers. The wholesale price of eggs in the first quarter soared 40 percent from a year earlier, according to the Agriculture Department. Meanwhile, retail prices of countless food items, from cereal to sodas to salad dressing, are being nudged upward by more expensive ingredients such as corn syrup and cornstarch.

Rising food prices have given Congress and the White House a sudden case of legislative indigestion. In 2005, the Republican-led Congress and President Bush backed a bill that required widespread ethanol use in motor fuels. Just four months ago, the Democratic-led Congress passed and Bush signed energy legislation that boosted the mandate for minimum corn-based ethanol use to 15 billion gallons, about 10 percent of motor fuel, by 2015. It was one of the most popular parts of the bill, appealing to farm-state lawmakers and to those worried about energy security and eager to substitute a home-grown energy source for a portion of U.S. petroleum imports. To help things along, motor-fuel blenders receive a 51 cent subsidy for every gallon of corn-based ethanol used through the end of 2010; this year, production could reach 8 billion gallons.

Now, however, the legislation is being criticized for making food more expensive while gasoline prices continue to climb. Rick Perry, a Republican who succeeded Bush as Texas governor, has asked the Environmental Protection Agency to waive half of the "misguided" ethanol requirements because of rising food costs; every penny increase in per-bushel corn prices costs his state's livestock industry $6 million a year, he said.

Although ethanol was once promoted as a way to slow climate change, a study published in Science magazine Feb. 29 concluded that greenhouse-gas emissions from corn and even cellulosic ethanol "exceed or match those from fossil fuels and therefore produce no greenhouse benefits." By encouraging an expansion of acreage, the study added, the use of U.S. cropland for ethanol could make climate conditions dramatically worse. And the runoff from increased use of fertilizers on expanded acreage would compound damage to waterways all the way to the Gulf of Mexico.

Development specialists have also joined the fray. "While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs, and it is getting more and more difficult every day," World Bank President Robert B. Zoellick said in a recent speech.