Corn Commentary

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 DomesticFuel.com.

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.

Farm Bill Still Stuck

It appears as though another extension of the 2002 Farm Bill is inevitable, since the current extension is set to expire in just a few short days and Congress is still stuck on working out funding for a new bill.

Farm BillEven though key agriculture committee members from both houses and both parties expressed optimism last week that a compromise was in the works, virtually nothing was accomplished, and Congress is recessing this Friday for Easter, the day before the current extension expires. The latest word is that they are hoping for a compromise by mid-week so that staff can work over the recess on the details.

Meanwhile, the Washington Post editorialized on the farm bill Sunday, basically saying that because corn prices are high and net farm income is up, there is “no justification whatsoever for spending billions more on agriculture.” Here’s an excerpt:

“…in this flush time for farmers, House and Senate conferees are contemplating a farm bill that might cost $10 billion more over the next decade than the current law would have. The tentative $280 billion-plus price tag includes needed spending on nutrition and soil conservation programs — but also about $5 billion a year in cash transfers to corn, soybean, wheat, cotton and rice farmers over the next five years. So far, there are no meaningful limits on the amount each farm enterprise can receive. Thus, plenty of this federal largess will be showered on people much richer than the average American, who is struggling with higher food costs.”

There are about 20 comments so far on the editorial, many of which point out the importance of farm programs. This is another great opportunity to at least try to educate the general public.

Schafer Explains Bush Comments

Comments by President Bush this week that corn prices are affecting food prices required some explanation after the fact by Secretary of Agriculture Ed Schafer.

During a speech this week at the Washington International Renewable Energy Conference 2008, Bush said, “Corn ethanol holds a lot of promise, but there’s a lot of challenges. If you’re a hog-raiser in the United States, you’re beginning to worry about the cost of corn to feed your animals. I’m beginning to hear complaints from our cattlemen about the high price of corn. The high price of corn is beginning to affect the price of food.”

WIREC SchaferTalking to Brownfield Network reporter Peter Shinn afterward, Schafer said there is no inconsistency between the President’s remarks about the impact of corn demand from the ethanol industry on food prices and the long-held USDA position that higher energy prices play a greater role in food price inflation.

“Well, I think the President stated an obvious fact that everybody knows today that food prices are being challenged by fuel prices,” Schafer said. “But really, this is a consistent administrative policy and direction, and I was pleased the President pointed out the fact that, though corn prices are under pressure right now, the pathway is to cellulosic ethanol.”

Schafer addressed WIREC on Tuesday and hosted a ministerial luncheon at the event Wednesday. WIREC 2008 featured representatives from over 100 countries with attendance estimated at seven to eight thousand. The event wrapped up Thursday.

Read the Brownfield story here.

Corn Growers Can Help US Get Off Oil

President Bush had a pretty simple message Wednesday at the Washington International Renewable Energy Conference 2008 (WIREC).

“America has got to change its habits. We’ve got to get off oil.”

WIREC BushNo kidding. About the time he was making that statement, crude oil on the New York mercantile exchange jumped nearly $4 on falling oil inventories, trading over $104 a barrel and setting a new all-time record. The expectation is that gas prices will reach $4 a gallon by Memorial Day now.

Bush renewed his support for ethanol produced by the nation’s farmers to help us change our habits and get off that high-priced oil.

“The vast majority of that ethanol is coming from corn, and that’s good,” he said. “That’s good if you’re a corn-grower. And it’s good if you’re worried about national security. I’d rather have our corn farmers growing energy than relying upon some nation overseas that may not like us. That’s how I view it.”

He did express concerns about corn ethanol, however, and stressed the need for cellulosic technology.

“The best thing to do is not to retreat from our commitment to alternative fuels, but to spend research and development money on alternatives to ethanol made from other materials — for example, cellulosic ethanol holds a lot of promise. I’m sure there are people in the industry here that will tell you how far the industry has come in a very quick period of time.”

As to changing habits, Bush noted, “I probably didn’t help today when I rode over in a 20-car motorcade.” Some things may never change!

Read the president’s remarks here.



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