This shouldn’t be much of a surprise since it’s a simple implication of the law of supply and demand. As the demand for corn increases for ethanol production, there is less supply available for human and animal consumption. As a result, the price of any food product with corn goes up.

This is similar to a conclusion that I came to while studying the potential of biodiesel and why any biofuel isn’t a good investment or a solution to rising gas prices. Quite simply, using crops to provide energy rather than using those crops as food sources ignores the larger trends affecting the agriculture industry.

From the mid 90s to 2006, vegetable oil consumption in China has increased from 8kg/person to 16kg/person,¹ while vegetable oil consumption in India was 10kg/person in 2005.² While neither of these countries matches the per capita vegetable oil consumption of 34kg/person in North America,³ their consumption levels are only likely to increase as they continue to industrialize.

More significantly, China and India add approximately 25 million people to the planet each year. (That’s slightly less than one Canada per year!) Since both countries already import a lot of food, the growing populations combined with their current consumption level suggests that these countries will need to import even more food in the future. Based on these demographics and figures, agricultural production would need to increase by one Canada almost every five years just to meet current demand for food.

Although the above analysis is overly simplistic since I’m only looking at one crop, the implications should be clear: food prices are going to keep increasing because of rising demand/decreasing supply. Similarly, the price of biofuels will continue to increase simply because they are in competition with food. Since its unlikely that a government will allow its people to starve, biofuels don’t really have a future.

NOTE: THIS POST WAS ORIGINALLY PUBLISHED MAY 23, 2007 AND REPUBLISHED TO REFLECT CHANGES TO THE ARTICLE AND THE DIRECTION OF THE BLOG.