by nomo » Mon Oct 24, 2005 5:13 pm
Peak Corn? As Wal-Mart Shifts from Petroleum to Corn, Farmers Flee the Crop<br><br>by Ethan Genauer, Philly Beyond Oil<br><br><!--EZCODE AUTOLINK START--><a href="http://thephillyoildrum.blogspot.com/2005/10/peak-corn-as-wal-mart-shifts-from.html">thephillyoildrum.blogspot...-from.html</a><!--EZCODE AUTOLINK END--><br><br>Attended by over 100 companies, this week Philadelphia hosted the inaugural conference of the Sustainable Packaging Coalition. The biggest news of the Oct. 17 - 19 event was made when Wal-Mart executive Matt Kistler announced that the retail giant, which is also America's largest grocery seller, is beginning to switch from petroleum-based to corn-based plastic packaging.<br><br>The first substitution, The Philadelphia Inquirer reported, starting Nov. 1, involves 114 million clear-plastic clamshell containers used annually by the retailer for cut fruit and herbs.<br><br>"With this change to packaging made from corn, we will save the equivalent of 800,000 gallons of gasoline and reduce more than 11 million pounds of greenhouse gas emissions," said Kistler. "This is a way to make a change, positive for the environment and for business," he said at the Sustainable Packaging Forum.<br><br>The decision comes as high oil and natural gas prices — the sources for most plastics — are ramping up the cost of plastic materials. Kistler did not say whether the new plastic costs more or less than the materials it replaces, but said Wal-Mart expects the price of corn-based plastics to be less volatile than those of petroleum-based plastics, the Inquirer reported.<br><br>But recent reports from America's cornbelt suggest that Wal-Mart's expectation of less volatile prices for corn-based plastics may be wrong. The high price of natural gas has forced farmers to pay record-high costs for fertilizers. Natural gas is the energy source used in 95% of fertilizers to produce its main ingredients, such as ammonia and nitrates. And, compared to wheat and soybeans, corn is the most fertilizer-hungry crop harvested by America's industrial-sized farmers.<br><br>A common response by farmers to the higher fertilizer costs will be to plant less corn, according to an Associated Press story published this week. One Nebraskan farmer said he has decided to plant 25 percent more wheat in the hopes of curbing his consumption of anhydrous ammonia. "It's possible the country will see a drop in corn production next year, which would give way to higher prices at grocery stores months from now," said Bob Young, chief economist of the American Farm Bureau.<br><br>Inevitably, the diminished supply of corn would also extend higher prices to other corn-based products like plastics and fuel. And with demand for biofuel derived from corn, or ethanol, increasing, and no forseeable decline in America's appetite for corn-based foods such as tortillas, breakfast cereals, snack chips, milk and bacon — 57% of American corn is used as feed for livestock — competition between various corn users for limited corn supplies could drive prices up even more. Would these price increases be sufficient to offset the high cost of fertilizer and turn farmers back to corn? Given the inherently volatile nature of farming, the answer to that question seems impossible to predict.<br><br>Ultimately, this means that while Wal-mart's move to corn-based from petroleum-based packaging certainly makes great environmental sense, the long-term economic benefits for the company may be substantially less sure. As it turns out, there is virtually no sector of America's economy that is not dependent upon, and deeply affected by the end of, abundant supplies of cheap fossil fuels.<br><br>As those supplies peak and then begin to dwindle in the near future, one must hope that the diversion of corn to industrial and transportational purposes — like plastic and ethanol — doesn't spell doom for its original and most humanly meaningful use: food.<br><br>After all, the agricultural industry has demonstrated time and again that its core purpose is not to feed people, but to make money. Case in point: the corporate beneficiary of Wal-mart's switch to corn is NatureWorks, a Minnesota-based division of agricultural commodity giant Cargill. <p>--<br>When all else fails... panic.</p><i></i>