Increased ethanol demand in the United States will most likely put strains on the agricultural sector - from markets to the environment to crop production and food products. One Ohio State University agricultural economist suggests increasing expenditures on crop yield research to soften the blow of such impacts and keep the country internationally competitive.
"The idea is to build yield down the road so that we can accommodate food demand, fuel demand and the environment, while minimizing other potential suppliers coming in and taking our market share," says Carl Zulauf, professor in the Department of Agricultural, Environmental, and Development Economics.
Creating a win-win solution through increasing yield is Zulauf's way of encouraging others to recognize the direction the country is taking to becoming more energy independent, the pressures that it will create on the agricultural industry, and more importantly, that the change is long-term.
"We have made, as a nation, what looks to be a generational policy decision in moving toward greater energy independence, and those types of decisions don't fade away. We change the way we think, act, and organize ourselves when we make a generational policy decision," says Zulauf. "One component of energy independence is likely to be some form of renewable energy. It isn't clear yet what the mix of renewable energy will be, but at least in the short run you have to believe that corn-derived ethanol will be a component of meeting our desire for energy independence."
Using corn as an energy source is already changing the dynamics of markets, producers, and users.
"The ethanol industry is growing so large and so fast that its demand is now outstripping the country's ability to supply that demand from historical increases in yields, which generally have been about 1.7 percent annually over the last 30 years," says Zulauf.
Several options are brought to the table as a result of trying to meet that demand:
- Increase the number of acres planted to corn. Growers are already responding with the highest acreage intended for planting since World War II.
- Shift land from other uses into crop production. Potential candidates include pastureland, conservation reserve land and forests.
- Import more ethanol. Because of import tariffs and a drive for energy independence, imports likely will have a limited role.
- Ration corn demand in response to higher prices.
- Increase yields.
"These adjustments, however, carry tradeoffs. If you ration demand, you will reduce the size of the U.S. livestock sector, the U.S. bioenergy sector, exports of crops, or all three. If you bring additional land into production, you raise environmental concerns," says Zulauf. "The option that has the most likelihood of giving us the most positives is to increase the expenditures on yield research."