GoodFuels

High energy costs driving force behind changes

A study released earlier this year by the Agricultural and Food Policy Center at Texas A&M found that higher energy costs are the driving force behind changes in the agricultural industry.

As Jeff Broin, CEO of leading ethanol producer POET, points out in an interview with blog Earth2Tech, the answers we need can be found with a little simple arithmetic.

A study from the Agricultural and Food Policy Center at Texas A&M said, “The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil.” Just do the math. A semi can haul 4,200 boxes of corn flakes at a time, and with 10 ounces of corn in each box, that’s a total of 46.9 bushels of corn. At a $6 bushel, the corn in all 4,200 boxes has a value of $281.40. To haul those boxes 1,500 miles, however, would cost $881.25 with diesel priced at $4.70 per gallon. That means it takes 21 cents of diesel per box to get it to the store, yet the value of corn in that box is less than seven cents. What do you think is the real driver of higher food prices?

[Ed. note: The quote Jeff Broin uses can be found on page 3 of the study. A free copy is available by download here, or by clicking the direct link in the first sentence of this post.]

The rest of Broin’s interview is pretty interesting as well. He talks about his company’s future cellulosic plans as well as ethanol’s role in politics, among other things. You can find the rest of the interview here.