End to ethanol could stave off grain crisis

By Lucy Hornby

BEIJING (Reuters) - Halting production of ethanol from grains would help ease global grains shortages in the short-term, the founder of the Earth Policy Institute think tank said on Tuesday.

Ethanol, a fuel made from corn, accounts for a 20 million ton increase in the amount of grains consumed each year, far outpacing growth of about 2 million tonnes a year on average in demand from China, Lester Brown told reporters in Beijing.

Brown also called for higher water prices to encourage efficient water use and stave off a looming shortage caused by retreating glaciers and depleted aquifers.

"Growth in demand for ethanol in the United States exceeds growth for all purposes from the rest of the world," Brown said.

"One short-term solution is to end ethanol production."

To reduce reliance on imported crude oil, the U.S. government mandates the use of 9 billion gallons of ethanol in motor gasoline this year. But critics say growing corn for ethanol increases the use of water and petroleum for fertilizer and farming, without significantly reducing fuel demand overall.

A 'counter-lobby' of agricultural feed consumers and taxpayers is developing against the ethanol lobby, said Brown, who advocates radical cuts in carbon emissions by 2020 to avert global warming and a widespread food crisis in failing states.

"We're seeing internal politics develop in a way we haven't before. This is not your mother's food shortage."

Global warming could ultimately exacerbate food shortages if glaciers melt to the point that major rivers, such as the Yellow River in China or India's Ganges, become seasonal, Brown said. Both rivers supply irrigation and drinking water to large grain-growing regions.

A shallow aquifer in the arid North China plain is basically depleted, forcing wheat farmers to pump from a non-replenishable deep aquifer, he said.

"With tightening water supplies ... China may well move to the world grains market in the near future as it has for soybeans," Brown said.

Chinese planners subsidize grains production to avoid massive imports, which they fear could cause world prices to spike. But rising food prices are nonetheless driving inflation, spurring additional government measures to limit exports and cap the amount by which some prices can rise.

India, where average grains consumption is not far above subsistence level, is far more vulnerable to food shortages than China, where ample grains and a policy of importing soybeans has allowed meat production and consumption to develop, Brown said.

(Editing by Christopher Johnson)