Corn Commentary

Presidential Press Conference

Higher food and energy costs were topics during a presidential press briefing Tuesday morning.

Bush press conferencePresident Bush noted that the high price of gasoline is going to spur more investment in ethanol as an alternative to gasoline. “And the truth of the matter is it’s in our national interests that our farmers grow energy, as opposed to us purchasing energy from parts of the world that are unstable or may not like us,” he added.

Regarding food price inflation, one reporter said, “The World Bank says about 85 percent of the increase in corn price since 2002 is due to biofuel — increased demand for biofuels. And your Secretary of State said that — indicated yesterday that she thought that might be part of the problem. Do you agree with that?”

Bush responded, “Actually, I have a little different take: I thought it was 85 percent of the world’s food prices are caused by weather, increased demand and energy prices — just the cost of growing product — and that 15 percent has been caused by ethanol, the arrival of ethanol.”

The president said the United States is concerned about the scarcity of food in poorer countries and will continue to be generous in food donations abroad.

Growing Positive on Corn

In March 2007, the USDA stated that growers intended to plant 90.5 million acres of corn. Given that farmers had planted 78.3 million acres in 2006, this was a very optimistic prediction. This past month, the projection from USDA was 86 million acres, down from last year but still way above what was seen before.

High input costs, especially fertilizer, are greatly to blame, but the National Corn Growers Association has held that the number of planted corn acres will be above the USDA prediction. Today, we have further confirmation, via the Associated Press.

Darrell Good, University of Illinois agricultural economics professor:

“The pendulum has swung decidedly in favor of corn at this point. For a lot of the central and northern Illinois farms, corn pencils out easily to be $200 an acre more profit than soybeans.”

Last year, the final corn planting was 3.1 million acres over and above the USDA’s prediction. Question now is — how high in 2008?

Time to break another record, growers!

Corn at the Ball Park

Corn CupsCorn will be playing in the major leagues with the boys of summer this year.

Some of the nation’s major league baseball teams are adopting cups made from corn starch this season to help quench the thirst of fans and be more environmentally-friendly at the same time.

The Pittsburgh Pirates, for example, have announced a new greening initiatives program called “Let’s Go Bucs. Let’s Go Green.”

Pitt PiratesBeginning with the 2008 season, the concessionaires at PNC Park will be using corn-based beverage cups. They are also reportedly printing game-day programs with soy-based inks and providing flex-fuel vehicles for team scouts.

According to Bob Nutting, Pirates Chairman of the Board, “We are not launching this program because ‘going green’ is a popular trend. We are doing it because it is the right thing to do. The measures being put into place at the ballpark will have an immediate positive impact. These initiatives not only make sense for the environment, but they make good business sense as well.”

The Oakland A’s are also reportedly using cups made of biodegradable cornstarch this season.

T. Boone Pickens Endorses Ethanol

An editorial in today’s Wisconsin State Journal.

Texas oilman T. Boone Pickens, who once scoffed at ethanol, recently told the CNBC financial news network that he now supports increased production of the homegrown, renewable fuel. Pickens cited the $1 billion a day that America spends on imported oil.

The editorial writers appear to have been reading our blog. We’ll give them the final word:

In America, ethanol is currently produced chiefly from corn. Consequently, in their latest attack, naysayers have concocted a near-doomsday scenario in which increased demand for corn sends food prices sky high. Farmers all over the world would plow up forests to plant more acres, leading to an environmental disaster.

The critics’ mistake — aside from gross exaggeration — is that they are failing to look ahead.

Ethanol Responds to Scam Article

The Ethanol Promotion and Information Council (EPIC) has responded to the current Time Magazine cover story “The Clean Energy Scam.”

EPIC Fueling LogoIn a letter to the editor of Time, EPIC executive director Toni Nuernberg says the article makes corn-based ethanol “the scapegoat of the week.”

She notes that the studies alluded to in the article, although not specifically referenced, (authored by Timothy Searchinger and Joseph Fargione) “reach conclusions regarding the greenhouse gas emissions associated with potential global land-use changes caused by increasing biofuels demand — specifically for corn-based ethanol. Their conclusions are considered debatable by others in the scientific community.”

She also points out that the studies make assumptions that are unrealistic.

(The assumptions) double the level of corn ethanol that is actually required under the new Renewable Fuels Standards by 2015, an assumption that’s not realistic to U.S. corn ethanol production in the next seven years. Congress established a production cap of 15 billion gallons of corn ethanol by 2015 to help guard against dramatic land use changes. But Searchinger bases his projections on a model in which U.S. corn ethanol production increased from 15 billion gallons a year to 30 billion gallons a year by 2015. Thus, the findings are irrelevant.

Finally, she says, “today’s grain-based ethanol industry is providing the auto industry with incentive to manufacture flex-fuel and alternative-fuel vehicles and creating an infrastructure to distribute ethanol produced from any feedstock.”

You can read Toni’s entire letter on

Unfortunately, the Time article is filled with sensationalism, emotionalism and just plain misinformation that will lead the public to believe that corn ethanol is starving the world and responsible for for everything from destabilization in Pakistan to deforestation in Brazil. Toni’s letter is likely too long to make it into the Time letters to the editor, if they would even include it – but ethanol supporters everywhere who feel that they are being slandered by that article should respond with a deluge of letters to the magazine.

How Much Corn Will Farmers Plant?

That’s the multi-million dollar question on the minds of lots of people right now – one that will be answered to some extent by the USDA’s first educated guess on Monday morning when the prospective plantings report is released.

Business WeekBusiness Week did an article today about those who are eagerly anticipating the report – from livestock producers to the ethanol industry to market analysts.

Here are a couple of quotes from the article:

“Everybody is looking to see what that report is going to look like,” said Bob Dinneen, a spokesman for the Renewable Fuels Association. “Everybody is anxious, us included.”

Mindy Williamson, a spokeswoman for the Iowa Corn Growers Association, said the ethanol-fueled demand for corn has changed the dynamics.

“Before we weren’t in a demand-driven market,” she said. “Now, it’s all about demand and you have a choice about where we want to sell (corn) and who you want to sell it to. There are still other things beyond farmers’ control, like weather, but it’s a good time.”

Sweet Hyperbole

Nestle CEOThe chief executive officer of the world’s largest food and drink company has given new meaning to the word hyperbole.

Peter Brabeck-Letmathe, CEO of Swiss food giant Nestle, is quoted in various news reports saying, “If as predicted we look to use biofuels to satisfy 20 percent of the growing demand for oil products, there will be nothing left to eat.”

He also called planned subsidies for biofuels “irresponsible and immoral” and “political insanity.”

I do like the last sentence in the story on Forbes website from Thompson Financial News.

Thus far Nestle has been successful in passing on a strong hike in raw materials prices, including milk, cacao and corn, to its clients.

Thank You America’s Farmers

National Agriculture DayIt’s that special day of the year when we have a chance to thank America’s farmers and ranchers for all they do to help feed us and the world. You can find lots of good facts and figures on the National Ag Day website which is coordinated by the Agriculture Council of America. For example:

From a team of horses in the early 1900s to tractors with the power of 40 to 300 horses today, American farmers provide consumers with more and better quality food than ever before. In fact, one farmer now supplies food for about 144 people in the United States and abroad compared with just 25.8 people in 1960.

The efficiency of American farmers pays off in the price American consumers pay for food as well. U.S. consumers spend roughly 9 percent of their income on food compared with 11 percent in the United Kingdom, 17 percent in Japan, 27 percent in South Africa and 53 percent in India. This great value is due in large part to improved equipment efficiency, enhanced crop and livestock genetics through biotechnology and conventional breeding, and advances in information management.

Today’s farmers understand the importance of improving the quality and quantity of food available to the world. According to the US Census Bureau, it is estimated that there will be 7.5 billion people in the world by the year 2020 (we’re currently at 6.2 billion). It’s agriculture’s job to find a way to feed those people. Advancements in crop technology, equipment technology and information management will make that possible. American farmers and others involved in the agriculture industry have met and will continue to meet this challenge again and again.

Guess what? American farmers will continue to improve and increase food production while improving the environment and helping fuel the world.

Thank you America’s corn growers and farmers of all commodities for all you do!

Deconstructing Walter Williams

For an economics professor, Walter E. Williams should be pretty smart — and he often is. But his recent unprovoked attack on ethanol showed he’s not above taking up a few myths without the usual fact checking. At the risk of repeating negatives, let’s take a look under the hood of his column which you can read here in all its glory.

  • Ethanol “can cause major damage to automobile engines not specifically designed to burn ethanol.” All automotive engines can safely run E10 gasoline, which is 10 percent ethanol, and more and more automakers are producing flex-fuel vehicles that can run E85. And just recently, the state of Minnesota released research that found that many car engines can also run well on E20 gasoline. Automakers are investing a lot of money in promoting ethanol as a greener fuel. See here, here and here for examples.
  • “It takes 450 pounds of corn to produce the ethanol to fill one SUV tank. That’s enough corn to feed one person for a year.” There is no real practical comparison here. We’re talking about two different types of corn, yellow dent field corn versus sweet white corn. And ethanol is most commonly used as an E10 additive, so 450 pounds of corn (8 bushels) would produce enough ethanol to blend into a total of 224 gallons of E10 gasoline. But further, for all its benefits, that amount of sweet white corn (the equivalent of 1.25 pounds a day for one person over the course of one year) simply does not provide the calories or nutrition required for a stand-alone diet.
  • “It takes more than one gallon of fossil fuel — oil and natural gas — to produce one gallon of ethanol.” Actually, most of the research (including that done by the federal Department of Energy) demonstrates ethanol to be energy positive, resulting in more energy that it takes to produce it. Click here for more details.
  • “It takes 1,700 gallons of water to produce one gallon of ethanol.” Williams here is talking about how much water is also required to grow the corn from which ethanol is produced. But he ignores the fact that the bulk of this water is naturally occurring rainfall. Only a small percentage of corn acreage is irrigated. Ethanol production itself requires about three to four gallons of water per gallon of ethanol. Click here for more on this.
  • “Ethanol is so costly that it wouldn’t make it in a free market.” Perhaps it would have a better chance if the oil industry wasn’t spending so much money to perpetuate the myths we keep seeing. In reality, ethanol producers in 2007 helped support more than 230,000 American jobs, put more than $12 billion into the pockets of American consumers, and generated more than $8 billion in tax revenue – far more than any tax credits received. And higher demand for corn has been credited with reducing federal payouts to farmers by up to $12 billion. Details here and here.

You get the picture. Frankly, we’re tired of swatting away the same old myths that keep coming up, and the American public seems to agree with us.

Consumers Benefit From Ethanol

Americans are feeling the pinch of high gasoline prices, but the fuel could cost as much as 5 cents to 10 cents more a gallon if it was not routinely blended with ethanol. Overall, U.S. consumers and taxpayers benefit from saving $7 billion to $14 billion in lower gasoline costs as a result of increased ethanol use, according to Terry Francl, senior economist at the American Farm Bureau Federation.

AFBFFrancl said Americans will benefit in other ways, too. After farmers endured years of barely breaking even with corn priced around $2 a bushel, today’s relatively high market prices for corn, soybeans and other crops mean federal farm program payments will be reduced by at least $8 billion and possibly as much as $12 billion annually, he said. The overall gains to the economy from ethanol will more than offset any incremental food price increases associated with the production of biofuels.

25x'25These and other points about the emerging ethanol industry were shared by Francl during his presentation at a renewable fuels conference in Omaha this week. The aim of the 25 x ’25 Alliance, the sponsor of this week’s National 25x’25 Renewable Energy Summit. , is to advance the concept that by 2025, 25 percent of U.S. energy needs will be met by resources produced by this country’s farms, forests and ranches.

High crude oil prices are another contributor to today’s high crop and food prices, but Francl emphasized the extent to which increased use of ethanol and biodiesel may stem even higher gas prices.

“It’s easy to say the growth of the ethanol industry is leading to higher fuel and food prices, but that’s just not the case,” Francl said. “Complex and overlapping issues that developed over several years are at play, and the growing use of ethanol actually helps keep gas prices from going even higher.”

In addition, Francl said the U.S. benefits in other important ways from the burgeoning domestic ethanol industry. Besides a reduced reliance on foreign energy sources, the ethanol energy industry spurs new job growth and economic growth in rural areas. Ethanol also helps the environment because it is made from corn and other renewable resources.

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