This may not come as news to those of us close to the ethanol industry, but it is amazing to see a major business publication take the oil industry to task for fighting E85.
At the same time the industry is collecting a 51 cents-per-gallon federal subsidy for each gallon of ethanol it mixes with gas and sells as E10 (10% ethanol and 90% gas), it’s working against the E85 blend with tactics both overt and stealthy. Efforts range from funding studies that bash the spread of ethanol for driving up the price of corn, and therefore some food, to not supporting E85 pumps at gas stations. The tactics infuriate a growing chorus of critics, from the usual suspects—pro-ethanol consumer groups—to the unexpected: the oil industry’s oft-time ally, the auto industry.
This is a very interesting article that makes many of the points the ethanol industry has been saying for months now. There is also a comments section for it - provide some feedback!
Clearly it’s report season. A scan of recent posts on CornCommentary are indications of that. The Environmental Defense Fund is among those to join the fray rolling out ethanol reports, this time with a report on the potential impacts ethanol production can have on natural resources such as the Ogallala Aquifer. The report points out that the Ogallala region currently has only five ethanol plants and that another nine are under construction, increasing water needed for corn and ethanol production.
While the report–like so many others–makes several assumptions “due to lack of information.” John Holzfaster, chairman of the Nebraska Corn Board, has taken the time to provide the facts on corn production and water usage in his guest editorial “It’s time to put water usage in perspective.”
The next time you’re out watering your lawn, here’s some interesting facts to keep in mind, according to Holzfaster:
It is estimated that it may take around 1,750 gallons of water to produce a bushel of corn. That sounds like a lot, but did you know it takes 684,000 gallons of water per acre per year to irrigate a golf course? And that, on average, a homeowner uses 21,600 gallons to water his or her lawn each year?
Back in grade school, we all learned about water transpiration. As a corn plant grows, it takes in water, but it also transpires water, releasing it into the atmosphere and starting the hydrologic cycle all over again. According the U.S. Geological Survey, an acre of corn gives off 3,000-4,000 gallons of water each day through transpiration.
Yes, it takes water to produce corn. But let’s not overlook what this amazing plant is capable of producing: ethanol, livestock feed and cereal for breakfast. In short, fuel, feed, and food.
Despite a looming veto threat, the U.S. Senate overwhelmingly passed the Water Resources Development Act (WRDA) conference report Monday evening by a vote of 81-12, making a WRDA victory within grasp.
National Corn Growers Association (NCGA) President Ken McCauley says “It’s unfortunate the administration is threatening veto. Our infrastructure cannot keep pace with demands and is falling apart. We must upgrade the lock system on the Upper Mississippi and Illinois rivers to compete in the global market place. Our hope is the president will take seriously his responsibility to ensure our nation has a safe and viable infrastructure by signing WRDA into law. Ignoring that responsibility is a dangerous gamble.”
NCGA says a presidential veto will only delay passage of the bill as there is strong congressional support for WRDA and a veto override is likely.
Corn growers nationwide have been long-time advocates for improvements to our inland system. WRDA provides authorization for seven 1,200 foot locks on the Upper Mississippi and Illinois rivers. WRDA is crucial to farmers who depend on the inland waterway system to deliver their crops to the global marketplace and to businesses who rely on the system to move their raw materials and products.
According to Missouri Corn Growers Association president Mike Geske, “The Mississippi River transportation system is key to both exports and imports. We need access to grain and livestock markets around the world, but our cities and towns also need the ability to import basic commodities like steel, building materials and petroleum products.”
It is estimated that 60 percent of U.S. grain exports are transported via the Mississippi River. The construction of seven new locks will help speed barge traffic, allowing farmers and businesses greater access to global markets.
“Countries around the world are upgrading their transportation systems to compete in the international marketplace,” summarizes Geske. “Without these upgrades, the U.S. will not be able to maintain a competitive edge with markets across the globe.”
Two recent news articles in The Wall Street Journal and the Dallas Morning News cited petroleum industry analysts who pointed to lower priced ethanol as one major factor in restraining gasoline prices nationwide.
While tight refining capacity and higher world crude prices are helping to push the price of gasoline higher, ethanol is working in the other direction. As a September 21, 2007 story in The Wall Street Journal put it,
Another reason for steady gasoline prices: the use of ethanol as an additive to gasoline is on the rise. While crude prices have soared, ethanol prices have dropped as much as 30% in recent months and are likely to drop more, Eitan Bernstein, an analyst with Friedman, Billings, Ramsey & Co., said in a report yesterday. Ethanol costs more than 60 cents a gallon less than gasoline, and gasoline suppliers can offset some of the rise in crude oil prices by blending their gasoline with small amounts of the cheaper fuel. (emphasis added)
Peyton Feltus, president of Randolph Risk Management, thinks gasoline prices might even increase this year.
He said ethanol and bio diesel helped keep fuel prices stable since the summer. Blending ethanol into the fuel supply may have boosted pump prices in the past, but now, ethanol is cheaper than gasoline, and it’s keeping overall prices down. (emphasis added)
“You can thank renewables for doing that,” Mr. Feltus said.
New York Times “Wheels” blogger Jerry Garrett has taken another swing against ethanol in today’s “Corn Ethanol - Biofuel or Biofraud?” using the recent OECD report as ammunition. But, unlike the tortilla post, comments on this one are running more anti-ethanol, so get your voices heard.
Garrett takes the position that basically the federal government is a) keeping us from buying cheaper and better sugarcane ethanol from Brazil and b) not funding any research into cellulosic ethanol.
He says, “why is America, in particular, insisting on making ethanol from the worst possible choice? It seems that our government’s only true interest in ethanol production lies in placating its agricultural lobby, which in turn is seeking to cash in on forced legislative mandates for domestic ethanol production.”
We think of using corn for all kinds of products these days but have you considered deodorant? The folks at Dupont and Tate & Lyle have.
The DuPont Tate & Lyle Bio Products joint venture today announced that it is providing its innovative Zemea(TM) renewably sourced propanediol (Bio-PDO(TM)) product to Terra Naturals Inc., a personal care company, that has developed a line of natural deodorants that are corn-based, aluminum- and petroleum-free. Under the branded GREEN line of products, the deodorants are distributed through United Natural Foods in the United States and Purity Life in Canada and also are available at the Terra Naturals website, www.terranaturals.com.
Zemea(TM) renewably sourced propanediol is a 100 percent renewably sourced ingredient made from corn sugar. The Terra Naturals GREEN line includes deodorant sticks, sprays and roll-ons for men, women, teens and sport uses. These products offer excellent odor elimination, excellent texture and a non- sticky residue. The GREEN line products are free of petroleum-based chemicals, free of synthetic parabens and aluminum and use only plant derived ingredients.
“We are seeing increasing demand for products made from renewable, corn-derived ingredients in the cosmetics and personal care markets,” Steve Mirshak, DuPont Tate & Lyle Bio Products president, said. “While the demand for renewable products is real, we know consumers don’t want to compromise on the performance of their deodorants. We are pleased to offer Zemea(TM) as an ingredient that has helped Terra Naturals deliver a high-performance line of deodorants that really work.”
I have been traveling abroad for the past two weeks and getting an international perspective on biofuels which has been very interesting. I have been in Germany, Belgium and Japan and biofuels has been a topic everywhere.
In Brussels I was on a trip sponsored by BASF Ag Products with a group of ag journalists who had the privilege of meeting with the European Commission’s spokesman for agriculture and rural development Michael Mann. “Biofuels is now a major issue, of course,” he said. He discussed the Commission’s plans to have biofuels make up ten percent of transport fuels by the year 2020. “We’ve also set that some of that will have to come from imports and we will also favor in the long term second generation biofuels,” Mann said. “We don’t want too much of our agricultural land to be diverted away from food and feed production. So, its a balance between the importance of biofuels for environmental reasons and to lower our reliance on imported oil, but at the same time not upsetting our food and commodity markets too much.”
According to Mann, the EU has incentives for rural development of biofuels refineries in place, which are actually grants. “Developing biofuels plants is something you can receive a grant for from rural development funding.” In addition, there is a tariff in place for ethanol imports to the EU and there are incentive payments for farmers to produce crops for biofuels production which was introduced in 2003. “If you have a contract with a biofuel producer to produce the raw materials for biofuel, you can get an extra 45 euros per hectare on that land.” Mann says they are reconsidering that incentive, in light of the OECD criticism of biofuels subsidies and also because there is now a market because the target is in place.
The EU is expected to eliminate its current mandatory 10 percent setaside for the next crop year to allow farmers to produce more for the market and Mann says that of the 3.8 million hectares currently set aside, they estimate about half will go back into production, much of it into corn.
So, Europe is facing some of the same issues we are in the US, which is very interesting. Here in Japan, where I am at a congress for international ag journalists, I am actually getting perspective from all over the world. More on that later.
Meanwhile, you can listen to all of Mann’s remarks about biofuels in the EU here: Michael Mann (6:00 min mp3)
NCGA has a new video out and you can watch it on YouTube. It focuses on the connection between the nation’s corn growers and the land they farm. (Part One, Part Two, Part Three)
Titled “Growing for the Future,” the story includes reminiscences from corn growers about the farming practices they grew up with, and how they’ve been able to take advantage of new technology to protect soil from the continuing threat of water and wind erosion, reduce agricultural inputs and improve the long-term health of their fields.
“This is an important step to communicate with people who may not have any first-hand knowledge about agriculture,” says NCGA President Ken McCauley. “With all the concern about the impact of agriculture on the environment, it’s vital for people to know the role agriculture has in protecting our environment.”
Corn growers from Colorado, Iowa, Kansas and Missouri speak from the heart about the challenges they faced in their environmental efforts. “We’re changing fertility, we’re changing the amount of water that we apply, we’re changing the tillage, we’re using variable rate technology for both insect control, disease control and also nutrient management,” noted agronomist Mike Petersen. “That’s huge!”
The video also brings out the link between growers and the land, making it clear that environmental responsibility is a part of their lives. “The soil has given back to us over the years,” concluded Byron Weathers, of Yuma, Colo. “If we take care of it, it will take care of us.”
The new video is part of a broader campaign by NCGA to provide factual information to the public about corn and the environment. The video is available for download on the NCGA Web site. The video runs approximately 10 minutes, and is viewable and in three sections. An NCGA “white paper” on sustainable agriculture (pdf) and smaller topic briefs are also available on the site.
Well, just when you think you’ve seen enough on this topic, out comes another “study” that’s being used to try and negatively impact the development of ethanol in the United States. It should come as no surprise that this study was funded by the National Turkey Federation, National Chicken Council and American Meat Institute. It’s titled “Fuel Ethanol Subsidies: An Economic Perspective” (pdf). That would be their economic perspective.
No industry has benefited more from low-priced corn in the last decade than the meat and poultry sector. Here’s some facts sent to me to point this out. Below-cost-of-production feed allowed the broiler chicken industry to save $11.25 billion and the integrated hog industry to save $8.5 billion in costs between 1997 and 2005, according to a February 2007 study by Tufts University. The same major meat and poultry production companies that have been raking in record profits are now criticizing the efforts of American grain farmers to build value and demand for their product.
The AMI study’s claims on the impact of the federal ethanol program are greatly exaggerated. For example, the ethanol industry generated an estimated $2.7 billion of tax revenue for the Federal government in 2006. This is $211 million more than the estimated cost of the VEETC which so many people and groups are complaining about. In addition the ethanol industry generated $2.1 billion of additional tax revenue for State and Local governments. Furthermore, higher corn prices resulting from stimulated demand reduced federal payments to farmers by an estimated $6.7 billion. The ethanol industry creates economic growth and more than pays for itself. And the tax credit program helps sustain investment in a risky and young industry.
The study bemoans that “cost increases are already starting to show up” for common retail food items and blames ethanol as the cause. It is true
that food prices have increased in 2007, but only marginally. USDA forecasts the Consumer Price Index (CPI) for all food to increase 3.5 to
4.5 percent in 2007. This compares to the 25-year average of 2.9 percent, but is significantly lower than the average of 5.5 percent between 1979 and 1990. Additionally, rising energy costs have much more to do with food price increases than modest increases in grain prices. In fact, a recent study by John Urbanchuk concluded, “By a factor of two-to-one, energy is the chief factor determining what American families pay at the grocery store.”
There’s a lot more in this study that really needs to be amended to have any real credibility but then just look at the source. It concludes with a statement that there’s just not a need for a Federal subsidy program to promote ethanol production. That’s certainly not offering any real constructive advice or solution.
In the early stages of developing Corn Commentary I realize we’ve been focusing quite a bit on ethanol and the whole food vs. fuel debate. We’ll definitely be branching out and diversifying our topics so please bear with us. Having said that I can’t help but point out some current items related to the subject that seems to be getting a lot of press again in the past week.
For starters, I’d like to point you to a white paper put out by Food and Water Watch. This is a group that has ties to some very anti-agriculture organizations. However, they’ve just issued a white paper titled, “Retail Realities: Corn Prices Do Not Drive Grocery Inflation” (pdf). Here’s an excerpt:
Pundits and food and meat processors have lamented this year’s rise in corn prices with little attention to the long-term declining trends in the real price of corn. The implication that rising corn prices warrant grocery price hikes ignores the historical grocery price insensitivity to corn prices. Over the past three decades, grocery prices have steadily trended upwards regardless of significant price volatility for corn.
Contrast that with a very misinformed editorial in the N. Y. Times this week title, “The High Costs of Ethanol.” The author of this piece claims, “Even now as Europe and China join the United States in ramping up production, world food prices are rising, threatening misery for the poorest countries.”
Give me a break. Without offering any facts or proof the author suggests that there’s a correlation between increased ethanol production and food price misery in poor countries. That’s emotional pap at best and inexcusable ignorance from a publication that would like you to put credence in what they say and think.
Going back to the Food and Water Watch paper, it’s interesting to see who your friends can be sometimes.
An October 1 article in Business Week entitled the “Big Oil’s Big Stall On Ethanol” claims that oil companies “seem determined to fight the spread of E85, a fuel that is 85% ethanol and 15% gas.”
NCGA says a presidential veto will only delay passage of the bill as there is strong congressional support for WRDA and a veto override is likely.
Rising gas prices have made headlines this year, but those prices could have been much worse if not for ethanol.
We think of using corn for all kinds of products these days but have you considered deodorant? The folks at Dupont and Tate & Lyle have.
Zemea(TM) renewably sourced propanediol is a 100 percent renewably sourced ingredient made from corn sugar. The Terra Naturals GREEN line includes deodorant sticks, sprays and roll-ons for men, women, teens and sport uses. These products offer excellent odor elimination, excellent texture and a non- sticky residue. The GREEN line products are free of petroleum-based chemicals, free of synthetic parabens and aluminum and use only plant derived ingredients.
I have been traveling abroad for the past two weeks and getting an international perspective on biofuels which has been very interesting. I have been in Germany, Belgium and Japan and biofuels has been a topic everywhere.
According to Mann, the EU has incentives for rural development of biofuels refineries in place, which are actually grants. “Developing biofuels plants is something you can receive a grant for from rural development funding.” In addition, there is a tariff in place for ethanol imports to the EU and there are incentive payments for farmers to produce crops for biofuels production which was introduced in 2003. “If you have a contract with a biofuel producer to produce the raw materials for biofuel, you can get an extra 45 euros per hectare on that land.” Mann says they are reconsidering that incentive, in light of the OECD criticism of biofuels subsidies and also because there is now a market because the target is in place.