I'll grant you that food competes with a whole host of things, but doesn't that pale in comparison with a use like ethanol which could swallow up our whole corn supply?  It has already been stated elsewhere that even using 19% of our supply it hasn't even been able to fulfill the increse in demand for our fuel. Therefore, the argument  that is has always competed sounnds to me like a non sequitur.
The entire USA industrial agro-oil industry is a mechanism to transfer hydrocarbons into carbohydrates while obesifying the USA population, impoverishing the taxpayers, and shafting photon to carb producers elsewhere.

In other words, it must be more profitable than selling the crude directly to refiners,

You can eliminate the feedlot cattle/cheezo subsidies now, or be forced to later.