Corn Commentary

Enjoy the Cheap Gas Ride

cheap gasNot to sound like a lunatic but it may be entirely possible, maybe even likely, the American public will be begging for a return to $3.60 gas in the near future.

I know it sounds crazy, but if you are following the public debate you can already see the discussion heating up to argue the true implications of today’s bargain basement petroleum prices. The euphoria consumers and market analysts alike were experiencing a few weeks ago is wearing off like a cheap wine hangover.

One big concern is that near term economic gains in the US related to cheaper fuel may be overstated and ultimately result in deflation and a global economic slowdown.

It is becoming increasingly evident that it could take a few years before the full ramifications of this gas guzzlers holiday are known. However, some comments by an oil industry executive this week provide a peek behind the curtain that often shields the business maneuvering and real objectives of international big oil.

The boss of oil giant BP Bob Dudley has said that oil prices could remain low for up to three years. What results next may make our previous high oil prices seem like a gift from grandma.

Once big oil has beaten oil upstarts like the domestic fracking industry to a bloody pulp, they will remerge from the ashes like a phoenix ready to spank bad little consumers for cheering the development. The paddle they will use according to some industry experts will be $200 a-barrel oil, a considerably richer prize than the $110 a barrel which preceded the $47 a barrel we are currently experiencing.

Any reasonable person would wonder why a business would take such a gamble, cut investment, cut jobs and sustain such a huge loss? The simple answer is they will do it because they can and the payoff is immense.

Sure oil countries like Norway, Russia, Venezuela, Scotland, Nigeria and Angola will take a beating but the big players in OPEC – the ones with the large expanses of beach and no water – have lower production costs and care only marginally more for their business partners than they do the consumers that they bleed every day.

People’s Bank of China governor Zhou Xiaochuan also points out low oil prices could slow down China’s development of renewable energy projects. In a wondrous masterpiece of understatement he says: “We worry a little bit that the price signal may give disincentive for new energy types to develop and could reduce investment in new non-fossil energy.”

Does anyone know how to say “duh” in Mandarin?

If we really want to throw the market manipulating overlords at OPEC a curve we should do the opposite of what they expect. Instead of grumbling and driving circus clown size cars we should immediately find ways to encourage an expansion of existing non-fossil energy development such as ethanol. Then we should back that up by launching the largest energy research and development project in history. I contend we will be forced to do this as finite oil supplies run out. Why not do it now rather than waiting until the wolf is at the door.

Besides, in the business world innovation is one of the few things that can still trump monetary muscle.

Ag Secretary Stresses Biofuels Support at AFBF

afbf15-vilsack-stallmanFarmers from around the country had a chance to ask Agriculture Secretary Tom Vilsack questions during an informal town hall-style meeting at the American Farm Bureau convention this week in San Diego.

The last question he took was from a South Dakota farmer who asked about continuation of strong biofuels policy in the United States. Vilsack detailed his continued support for the industry, particularly in the area of exports. “I am a firm believer in the future of the biofuels industry,” he said. “Ethanol production is at record levels…we’re now beginning to see great interest in the export market, not just for ethanol but also for dried distillers grains.”

Vilsack also noted the need to update the research on ethanol when it comes to indirect land use. “A lot of the push back to the industry is based on studies that took place 15 years ago, 10 years ago, and there have been enormous increases in productivity of American farmers, that basically suggest the indirect land use calculations are not as accurate as they need to be,” he said.

Listen to the secretary’s comments on biofuels here: Secretary Vilsack at AFBF on biofuels


2015 AFBF Convention photo album

Big Oil Wants It Both Ways

Falling gas prices have dominated news coverage over recent months. From “price at the pump” reports to longer diatribes over the economic and political impacts of falling oil prices, media outlets of all genres present a wide array of viewpoints on the topic.

Not surprisingly, this puts the American Petroleum Institute in the spotlight once again as eager journalists inquire about the causes of the downswing. Not shockingly, Big Oil’s mouthpiece provides a persuasive argument for why increased domestic production pushed prices down. While this makes sense, it diametrically opposes their earlier stance on the correlation between production and price in their industry.

In late October, the Renewable Fuel Association’s Geoff Cooper first pointed out the inexplicable shift in how API views the laws of supply and demand. Simply, it somehow seems that if the increased supply comes from ethanol, and thus not the petroleum industry which it represents, it increases prices. If the increased supply comes from their Big Oil-backers, it decreases prices.

The basic laws learned by every student in an entry-level econ class only apply if they suit Big Oil’s all oil agenda. When they do not, one is to believe the basic tenets of economics reverse themselves. The laws of economics actually bend to suit API’s needs.

To read his full post, click here.

In reality, the rules do not change. Through well-funded, carefully crafted campaigns of confusion, API obfuscates the obvious – ethanol benefits American consumers by lowering the price at the pump. But, as it does not line Big Oil’s already bulging pockets, it remains an inconvenient truth that they would rather repudiate until its basis suits their own base interests.

American consumers can certainly celebrate the momentary relief falling oil prices bring, but it makes sense to remember the hard facts every day.

Ethanol lowers prices and decreases reliance upon the Big Oil’s near monopoly. Fuel choice fuels the economy in a more reliable, substantial manner than volatile market conditions ever could. Supporting domestically produced, renewable ethanol means supporting a paradigm shift toward a more stable, more affordable energy future.

Freedom Isn’t Free

While we often hear politicians declare that they know “the greatest problem of our time,” few have the courage to face what really confronts us- a finite supply of oil.

Yes, today, oil is cheap. American consumers do not currently fork out the incredible sum to which they have become accustomed. Despite the momentary reprieve, oil remains of incredible importance for not only our country but the rest of the developing world.

Drivers increasingly demand an ever-growing supply of the fossil fuel abroad. At home, demand has declined somewhat but remains high when viewed in light of less auto-dependent nations. The family car remains a symbol of both status and freedom that elicits incredible desire.

This week, the Des Moines Register ran a commentary authored by a Gulf War veteran explaining not only how our oil-dependence impacted the wars of the past but fuels the conflicts of the future. Simply, continuing to depend upon oil dooms the U.S. to a cycle of conflict in the Middle East.

“Sadly, our continued addiction to petroleum here in the U.S. and across the globe makes doing so nearly impossible, and the rise of ISIS on the profits of the oil trade should remind us all that our oil dependence is dangerous and unsustainable,” David May explains in his piece. “Thus far, elected officials have opted to use military force to protect our national security by disrupting ISIS’s ability to bring a supply to the oil market. But another option — one that every American can play a part in — is decreasing the amount of oil needed to fuel our cars, trucks and heavy machinery.”

To read the original post, click here.

The news has made the growing threat of ISIS incredibly visible to Americans. Media portrayals, whether created by ISIS itself or domestic commentators, have shown the brutal reality faced by those living under its rule.

The danger appears larger-than-life. The underlying support hides in its shadow.

May argues on behalf of the Renewable Fuel Standard. This veteran, someone with real experience and hard-gained understanding, supports fueling our nation with fuel produced in our nation. His argument deserves serious consideration.

American corn farmers proudly grow the largest feedstock for domestic fuels. At the same time, rural America also supplies a disproportionately large number of America’s troops.

While more and more articles announce the return of a cheap oil economy, consider the ramifications. Depending on a finite resource has consequences. Ethanol offers a solution.

The future can be both greener and more peaceful. It is in our national interest.

Happy Anniversary to the RFS

rfs-7Friday marks the seventh anniversary of the signing into law of the Energy Independence and Security Act of 2007 (EISA) which expanded the Renewable Fuel Standard (RFS) as we know it today.

The Renewable Fuels Association (RFA) has compiled a report that examines the successful impact of the RFS over the past seven years on the economy, job creation, agriculture, the environment, fuel prices, petroleum import dependence, and food prices.

Among its findings, the report notes that “Renewable fuel production and consumption have grown dramatically. Dependence on petroleum—particularly imports—is down significantly. Greenhouse gas emissions from the transportation sector have fallen. The value of agricultural products is up appreciably. And communities across the country have benefited from the job creation, increased tax revenue, and heightened household income that stem from the construction and operation of a biorefinery.”

Renewable Fuels Association (RFA) president and CEO Bob Dinneen remembers that day seven years ago and talks about its accomplishments so far and how EPA needs to move ahead with the law as written. Ethanol Report on RFS Anniversary

Partisan Report on RFS

bpcThe Bipartisan Policy Center (BPC) appears to be a bit partisan in a new report released this week on “Options for Reforming the Renewable Fuel Standard.”

The report was produced after several meetings during the year with an advisory group that consisted of 23 members, seven of which were oil companies representatives. Only five members of the group represented agriculture (2) or biofuels (3). The rest were a mix of academia (2), big business (4) with two of those representing Toyota, environmental groups (2), and policy organizations (3).

Both of the agriculture representatives were from the National Farmers Union (NFU), president Roger Johnson and vice president of programs Chandler Goule. “It was very important that agriculture that supports the renewable fuels industry be present at the table,” said Goule, who notes that while the meetings were held in a very professional manner, “they were heavily skewed toward big oil.”

Goule says NFU has major objections to two of the policy recommendations made in the report. “The flattening of the total renewable fuel mandate at its current level going forward, but continuing to increase the three advanced categories, we have significant concerns about what that would to do ethanol and biodiesel,” he said. “Even more concerning was removing the total renewable fuel mandate and only mandating the three advanced categories. Basically what they are doing is giving in to Big Oil’s conclusion that a blend wall exists, which it does not.”

Chandler talks more about the BPC report in this interview: Interview with Chandler Goule, NFU

New Study Disputes Indirect Land Use Models

CARD LogoA new analysis of real-world land use data by Iowa State University raises serious concerns about the accuracy of models used by regulatory agencies regarding “indirect land use changes” (ILUC) attributed to biofuels production.

The study, conducted by Prof. Bruce Babcock and Zabid Iqbal at ISU’s Center for Agricultural and Rural Development (CARD), examined actual observed global land use changes in the period spanning from 2004 to 2012 and was compared to predictions from the economic models used by the California Air Resources Board (CARB) and Environmental Protection Agency (EPA) to develop ILUC penalty factors for regulated biofuels. The report concluded that farmers around the world have responded to higher crop prices in the past decade by using available land resources more efficiently rather than expanding the amount of land brought into production.

“There hasn’t been much land use change in terms of converting non-agricultural land into crop land,” said Renewable Fuels Association (RFA) Senior Vice President Geoff Cooper of the report results. “We’ve seen more double-cropping, we’ve seen triple-cropping in some parts of the world. And, very interestingly, we’ve seen an increase in the amount of planted acres that are harvested.”

Cooper says the study, which was funded in part by RFA, comes at a time when the California ARB is in the process of re-adopting its low carbon fuel standard, which includes revisiting their land use analysis. “So this paper, we hope, should inform that debate and bring some clarity and commonsense,” said Cooper. More importantly, this new analysis can provide input to states like Oregon and Washington which are currently working on developing low carbon fuel standards.

Cooper explains more in this interview: Interview with Geoff Cooper, RFA

Meet the new NCGA CEO

ncga-novakThe new CEO of the National Corn Growers Association had his first chance to visit with members of the agricultural media during the National Association of Farm Broadcasting convention last week in Kansas City.

Chris Novak previously served as chief executive officer of the National Pork Board, but prior to that, he was executive director of the Indiana Corn Marketing Council, the Indiana Corn Growers Association and the Indiana Soybean Alliance. So he comes to NCGA with plenty of experience.

“I’ve spent 11 years working on behalf of pork farmers, but I’ve spent more than 10 years working with grain farmers, corn and soybeans, across this country,” he said. “Lots of big challenges ahead for us. Looking at a record crop and lower prices than we’d like to see but that’s an opportunity for me as well.”

Novak sees increasing demand as the most important challenge and opportunity for the industry. “How do we ensure that with a second record crop in a row that we’ve got the demand that can keep our farmers profitable?” he said. The primary demand sectors – livestock, ethanol and exports – all offer new growth potential.

“Certainly EPA’s support and implementation of the renewable fuels law as passed by Congress is going to be important to us in the short term,” he added. “Longer term we’re looking to build consumer demand for a renewable fuel that increases our energy independence and helps reduce greenhouse gases.”

Novak also talked about the proposed Waters of the U.S. rule, the extended comment period for which just ended on Friday, and what he expects from the lame duck session of Congress and the new Congress in January. Interview with Chris Novak, NCGA CEO


2014 NAFB Convention Photos

Export Exchange Tours Visit Midwest

badger-visitMany of the international teams visiting the United States last week for the 2014 Export Exchange also participated in tours before and after the event to see ethanol plants and farms across the Midwest.

Badger State Ethanol in Wisconsin had the honor of hosting a team of buyers from the Kingdoms of Saudi Arabia and Jordan. The KSA/Jordan team included companies representing the major dairy and poultry companies and major importers of feed grains in both countries and have been buyers of DDGS in the last couple of years.

exex-tour-ken-ksThe Kansas Corn Growers hosted a Latin American trade team at two Kansas farms, the BNSF container facility at Edgerton and the East Kansas Agri Energy ethanol plant at Garnett to learn about corn, ethanol and DDGS. One of the farmers they visited with was former National Corn Growers Association president Ken McCauley.

Held every other year by the U.S. Grains Council (USGC) and the Renewable Fuels Association (RFA), Export Exchange brings together more than 200 international buyers with U.S. sellers of corn, sorghum, barley, distiller’s dried grains with solubles (DDGS), corn gluten meal and corn gluten feed. Over the course of three days of events and the pre- and post-tours, these individuals not only do business directly but also make connections to facilitate future sales.

Study Shows How Big Oil Rigs the System in St. Louis

Big Oil continues to rig the system. Using its stranglehold on infrastructure, it uses pricing strategies to edge out ethanol at the detriment of consumers’ pocketbooks and the environment.

A study recently conducted by the Renewable Fuel Association in the St. Louis area highlighted this point quite clearly.

The study looked to see if anti-competitive pricing strategies were being employed to discourage E85 sales in this unique market, where the only stations offering the fuel are owned by one of the “big five” oil companies. Less than shockingly, the study found that E85 sold for one percent more than E10 on the retail market despite being priced 12 percent below E10 on the wholesale market.

To read the full study, click here.

The results show clearly how some gas companies and their franchised retailers strategically price E85 to discourage consumers from using the renewable, domestically produced biofuel. Big Oil has grown so good at what it does that, in many cases, they manage to make consumers to feel negatively toward E85 at the same time they continue to take choice out of their hands.

Does this Machiavellian plan end there? Of course not. Big Oil is better than that.

The pricing strategy they designed to ensure that affiliated refiners cannot meet the blending requirements outlined in the RFS provides them with data to undermine to use when arguing against the statute. The RFS was designed to benefit Americans. Big Oil has orchestrated an effort to ensure it fails and then, in turn, to cry out as if they are being asked to do something unreasonable.

It seems what is unreasonable is acting as good corporate citizens and in the best interest of all citizens, not creating workarounds to evade laws and continue to hold us over their barrels.

Find out what you can do to stop Big Oil from rigging the system by clicking here.



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