The Food-Feed-Fuel Triangle: Implications of Corn-based Ethanol for Grain-Use Competition

Arindam Banerjee
JEL codes: 
Discussion Paper # 167

The contemporary world is witnessing certain critical changes in the domain of grain utilization. With the ongoing efforts to substitute fossil fuels with bio-fuels, there has been a rise in the importance of fuel-use of cereals. This adds a new dimension to the food-feed competition that emerged in the 20th century. Revisiting Yotopoulos food-feed competition model in the context of the large scale corn-ethanol production in the US, this paper attempts to draw out the new theoretical tenets of grain-use dynamics that have emerged with the new food-feed-fuel competition. The crude oil prices appear to play a more important role in the competition for grains between the various end-uses. Along with this, the equilibrating role that animal-feed has played in the grain-use dynamics in developed countries, with large middle-classes, is jeopardized with the advent of grain-based bio-fuels like corn-ethanol. The examination of the issue reveals that the US bio-fuels targets can have more serious implications for food security in the future that what meets the eye.