Todd's Take

On Friday, Dec. 15, 2023, the U.S. Treasury Department increased the chances that corn-based ethanol and biomass-based diesel will soon be eligible for tax credits designed to encourage the production of sustainable aviation fuel (SAF). See that news here: https://www.dtnpf.com/…. USDA Ag Secretary Tom Vilsack said the SAF market has potential to reach 36 billion gallons per year, offering corn and soybean producers valuable access to a potentially large market at a time when the U.S. share of world export markets has suffered a three-decade decline. More specifics for the new proposal are due out by March 1, 2024.

With such large shifts in corn and soybean production proposed to meet the promises of SAF, the old food versus fuels debate is being revived as many question the wisdom of diverting agricultural resources to a larger share of the energy market. Hearing the different views in various media reports, I've noticed a strain of puritanism that needs to be called out. Here's a bit of history to put things in perspective.

Depending on who you listen to, agriculture began about 10,000 or 12,000 years ago, shortly after the end of the most recent glacial period. As recently as 1804, when the earth first became home for 1 billion people, wheat was being grown virtually the same way it had since the Pharaohs ruled Egypt. It was a collaboration of man and beast with gifts of sunshine and prayers for rain.

For modern day food purists, farming in 1804 represents a glorious age of raising natural food the way God intended, untouched by fertilizers, herbicides, pesticides or genetic tampering. What those of us who long for the good old days often overlook is the old way of farming didn't produce much food and starvation was much more common in the world at that time. In Asia, Africa and Brazil in the 1870s, 50 million lives were lost to famine, possibly linked to one of the most extreme El Nino events on record (https://news.climate.columbia.edu/…). In 1315 to 1317, Europe suffered its worst known famine, losing an estimated 10% to 25% of its urban population.

We don't have statistics on how many of the world's 1 billion people were undernourished in 1804, but the percentage had to be high. A work on hunger by History Professor Andrew Carlson, published by Ohio State University, asserted 65% of the world was undernourished in 1950 (https://origins.osu.edu/…).

Not only are more people being fed today, they're also living longer. Ourwoldindata.org points out that, worldwide, life expectancy of a newborn baby was 32 years in 1900 and improved to 71 years by 2021 (https://ourworldindata.org/…). The era of natural food, unaltered by chemicals, was not so glamorous and shouldn't be idealized into some Eden-like garden.

In 2023, the Food and Agriculture Organization (FAO) of the United Nations (UN) estimated 735 million people were undernourished in 2022 or 9.2% of the world's population (https://www.fao.org/…). That is a lot of people needing food, but we shouldn't overlook the tremendous improvements made from just one lifetime ago and the factors that made it possible.

Food production has increased dramatically since World War I, thanks largely to the arrival and increased use of machinery, fertilizers and chemicals, all of which have been heavily dependent on carbon fuels. As I mentioned last year (https://www.dtnpf.com/…), Canadian Scientist and author, Vaclav Smil, contends only 4 billion people could be fed today without the contribution of anhydrous ammonia to food production, a manufactured fertilizer that currently relies on natural gas for its production.

If we are really serious about overcoming hunger, we could talk about approving genetically engineered, drought-tolerant wheat, suitable for adverse climates. Unfortunately, eradicating hunger is much more complicated than producing more food.

A closer look at a 2023 U.N. list of 10 countries suffering most from hunger show all 10 mired in some form of conflict or civil war (https://www.wfpusa.org/…). Clearly, the global pandemic of 2020 was a primary factor in increasing the number of undernourished people, but we should also note Russia's expanding role in fueling African conflicts since sending the Wagner Group to the continent in 2017.

In the typical arrangement, Joseph Siegle of the African Center for Strategic Studies explains Russia offers cheap wheat and security services to aspiring authoritarian leaders in return for a country's natural resources or other advantages (https://africacenter.org/…). The strategy has been so effective in expanding Russian influence that there are only a few of the hungriest countries on the U.N. list that have not succumbed to Russia's offers of cheap grain, arms or debt relief. It's going to take a lot more than food to solve the remaining hunger problem.

If the world is going to keep producing food at a level that at least maintains the current standards of living, and if we truly want low-carbon fuels to have a greater share of the energy pie the world consumes, there aren't many good candidates that work on a large industrial scale. Electric planes aren't an option. Hydrogen shows promise, if enough cost-effective natural deposits can be found, but manufactured hydrogen is not ready for prime time.

Biofuels -- made from carbohydrate in corn, tallow, yellow grease and oil from various crops, including soybeans -- are practical, effective solutions that can be ramped up in a relatively short amount of time. With U.S. agriculture facing a significant loss of export share in the world to expanded production in Brazil and Russia, new biofuels markets offer a much-needed antidote to slow the decades-old trend of declining numbers of U.S. farmers and ranchers.

I sympathize with the innate longing many have to keep the earth undisturbed and understand the assault of the modern need for more. More people need more food, more heat, more fuel. It is easy to blame greed, but not wanting 8 billion people to starve or freeze in the winter isn't all about greed. If we're going to have an adult conversation about how to balance the needs of 8+ billion people without ruining the planet, we have to let go of this modern-day pining for a world that never was and stop cursing the changes that have improved our lives.

The production of food and fuel have always gone hand in hand and are simply different variations of energy, both of which are needed to feed the world. It's time we take stock of the bigger picture, be thankful for the miracles that brought us this far and face the future with a sober view of the choices before us. For this time and place in history, the expanded use of biofuels deserves a place at the table.

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The comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on X, formerly Twitter, @ToddHultman1

**

Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com.

Follow him on X, formerly Twitter, @ToddHultman1.

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