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Green Economics

How ethanol production could make for crumbly corn chips

The side-by-side production of corn for food and corn for ethanol raises a spatial externality issue.

By Matthew E. KahnGuest blogger / February 15, 2011

In this Oct. 13, 2010 file photo, central Illinois farmer Adam Wallace unloads harvested corn from his truck at Archer Daniels Midland Curran Grain Elevator near Curran, Ill. Corn grown for ethanol and corn grown as food have different qualities, so accidental cross-pollination could be problematic.

Seth Perlman / AP / File

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We want corn for at least two reasons. We want junk food and we want corn based ethanol. This article highlights a tension inherent in a recent ruling by the USDA that allows for a new corn to be grown for commercial use. "The corn, developed by Syngenta, contains a microbial gene that causes it to produce an enzyme that breaks down corn starch into sugar, the first step toward making ethanol. Ethanol manufacturers now buy this enzyme, called alpha amylase, in liquid form and add it to the corn at the start of their production process."

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SO, the ethanol manufacturers will enjoy a cost savings because they will need to buy less alpha amylase because the corn will "break itself down" to begin the process of transforming it into ethanol.

There is a potential problem though. "The decision, announced Friday, came in the face of objections from corn millers and others in the food industry, who warned that if the industrial corn cross-pollinated with or were mixed with corn used for food, it could lead to crumbly corn chips, soggy cereal, loaves of bread with soupy centers and corn dogs with inadequate coatings."

I do not have an opinion here on what is the right public policy but I'm always interested in how we resolve externalities. I am not an agricultural economist but this case raises a classic spatial externality issue. We have competing uses for scarce land and one use of the land (growing the corn ethanol) creates risk for nearby parcels of land that continue to grow corn for food. So, this sounds like we need a MOAT.

We need firewalls between these two types of corn to make sure that my frito chips do not become soggy or crumbly. I would like to ask a scientist here --- how would these corn fields "co-mingle"? Would wind patterns do it? Or birds eating in one place and pooping in another? Would a physical separation of these corn fields be sufficient to minimize the probability of this "contamination" of the food corn? "The association said that Syngenta’s own data indicated that as little as one amylase corn kernel mixed with 10,000 conventional kernels could be enough to weaken the corn starch and disrupt food processing operations."

What investments can be made upfront to minimize the probability of this bad scenario? How do we minimize the probability of cross-pollination? The creation of a spatial moat between these two types of corn offers one potential solution. Armed with GIS maps of which corn is grown where --- this would help to reduce the probability of crossed corn. (THIS post has been updated).

this article sketches that this same issue appears over and over again in agriculture and that in some cases that farmers have figured out ways to reduce the risk.