The Guardian UK reported today that 2009 USDA figures show 25% of grains grown in the US were used to produce liquid biofuels. The typical food vs fuel story follows. And it is mostly on point, if tinted by The Guardian's usual populist tone. Yes, all the grain could in principle be used to feed people. No, it isn't clear that grain-based ethanol is in fact better than burning petroleum when it comes to total greenhouse gas emissions or energy content.
The story ends with a nod toward "continued innovation in ethanol product" that supposedly is increasing yields and reducing costs. Huh. No mention, though, of the fact that any starch crop used to make fuel starts at a major disadvantage with respect to sugar crops, nor that there is an ethanol glut in the US due to construction of too many ethanol production plants. Neither does the story get into why ethanol isn't a very good fuel to begin with (wrong solvent properties, low energy content, water soluble).
I go into detail about this in my forthcoming book, but the upshot of the argument is that the US is investing quite a lot of money in ethanol production technology and infrastructure that will never be competitive with sugar derived fuels. And then relatively soon we will get butanol, longer chain alcohols, and true drop-in petroleum replacements made using modified organisms. In the meantime, I suppose we will just have to suffer through the impact of decisions made more for political reasons than for competitive or national security reasons. But grain to ethanol isn't really good for anybody except US Senators from farm states.