NYT Blogger Hits Ethanol Again

Ladies and gentlemen, start your keyboards.

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.”

Grrrrrr!

EU Biofuels Perspective

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)

Meat Industry Offers Exaggerated Perspective

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.

Study Examines Food Price Reality

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.

OECD and FAO Are Assumption Experts

The Organization for Economic Co-operation (OECD) and FAO have released their “OECD-FAO Agricultural Outlook – 2007-2016″ report. It’s worth a look if you like pages and pages of assumptions. It’s already being quoted and used by the people who want to bash the development of biofuels, most especially ethanol. There’s also a background paper from their 20th meeting of the Round Table on Sustainable Development, held at the OECD on September 11-12 titled, “Biofuels – is the cure worse than the disease?” (pdf). I’m wondering who attended that concluded the following, “The conclusion must be that the potential of the current technologies of choice — ethanol and biodiesel — to deliver a major contribution to the energy demands of the transport sector without compromising food prices and the environment is very limited.”

Here’s an example of their admitting to lots of assumptions (which should be seriously questioned) in the Outlook report:

This Outlook does not analyse the developments in the biofuels sector, but treats biofuel production through implicit and exogenous assumptions in a number of countries. In particular these include the US, the EU, Canada and China, while ethanol production in Brazil is an explicit part of the sugar baseline.

Bio-diesel production, in contrast, is assumed to remain relatively limited in the US, due to lower profitability caused by high feedstock costs. Soya oil use for bio-diesel production is expected to reach 2Mt in2007 and to further increase to 2.3Mt in2011, with no growth assumed for the remaining projection years.

I had a college professor who always told us that to assume is to make an “ass” of “u” and “me.” I guess you might figure out what I think of these reports.

Head of Chevron Clueless

Or perhaps he’s just not happy with the growth of a renewable fuel like ethanol being produced here in America to replace our dependence on foreign sources of oil while also contributing to the cleaning up of our environment. Whatever the reason (you make your own conclusion) ABC Rural reports that David O’Reilly who is the CEO and Chairman of Chevron Corporation publicly said that “biofuel production from corn and other grains is not sustainable.”

It’s just another example of someone making wild and unsubstantiated claims in an attempt to derail enthusiasm and support for the building of a new industry that will not only help our country and environment but relieve our dependence on foreign sources of fuel.

I like his statement about needing new technologies that would use things like waste to make fuel. Duh. Like that’s not also being worked on here in America? Many forms of alternative and renewable energy are being developed simultaneously and will continue to be. Let’s see if Mr. O’Reilly is willing to put his investments where his mouth is. How about contributing to the solution instead of whining and complaining?

Thanks to Dax Mahoney for the heads up.

Corn Facts From StrathKirn

Jim McClaren with StrathKirn, Inc. is preparing some excellent corn facts resources.

Here’s a graph from the first one showing “the real cost in chained-2007$ for corn feedstock based on proportional allocation of grain (starch) and conversion rates to ethanol (saccharification and yeast process).” The cost is obviously declining.

In the fact sheet which you can download here (Word doc) he concludes:

Despite recent increases in nominal price for corn, the overall trend remains down and hence corn grain remains a very attractive feedstock for ethanol production. At present, and excepting sorghum grain, there are no other large-scale commercially acceptable feedstocks, and it is doubtful that any economically viable approach can be developed within the fore-seeable future. Thus, it might be advisable to ensure that corn receives the R&D attention required for continued improvement.

Maybe Farmers Aren’t Betting Their Farm

In a recent cover story in the St. Louis Post Dispatch you kind of get a sense of where the reporter is slanting his piece right from the get go. It’s titled, “Betting the farm • Behind the ethanol boom Gains obvious, risks evident.” You can download the piece online for a small fee.

In the article the author makes a good case for how well the ethanol boom is benefiting farmers and rural communities but he can’t leave it there. He has to find a dissatisfied person to make a case that just because business isn’t better at their little store ethanol somehow isn’t helping with rural development. To me this is a good example of how a reporter can use their platform to inject what may very well be their personal bias into a story.

Contrast that with a paper just released by Ethanol Across America describing what is being done by our USDA office of Rural Development in this area. In his report, USDA Undersecretary for Rural Development Thomas Dorr says:

Energy and rural America have always been closely linked, but now we face an unprecedented opportunity to create wealth, new jobs and increased economic activity through production, instead of consumption. The 2002 Farm Bill was the first one to contain an energy title. The next farm bill is also expected to address America’s energy needs.

Food-Fuel Myths in NY Times Blog Bring on Grower Comments

Corn growers and ethanol supporters are really making their voices heard in comments to the misinformation about food, fuel and ethanol in the New York Times “Wheels” blog post “Ethanol and the Tortilla Tax.” This may have been a totally ignorant article to start with, but you have to be impressed with the forum this creates for debate.

At my last count (noon on 9/8), there were 110 comments on the post – including three of my own. Others include Rick Tolman of the National Corn Growers, Bob Dinneen with the Renewable Fuels Association and Don Hutchens with the Nebraska Corn Growers. But there are many others, including growers themselves, that posted comments defending ethanol and American agriculture. I counted at least 40 positive comments, 27 negative, and about 20 that advocate some other alternative – like sugar, speed limits, hemp, electric, solar, butanol, etc. There are also another 20 or so that I put under the category of “Huh?” that were kind of bizarre or just off subject.

Here are a few examples:

“The critics ignore the production cost of gasoline and raise the issue with ethanol as if it were unique.”

“(Ethanol has) a 105 octane rating and is better than gas.”

“Corn prices have smaller impact on food prices than energy and marketing costs.”

“The price of food is going up so that the U.S. can develop a system of self-sufficient energy production. Is this bad or wrong?”

“What you are seeing is a semi-capitalistic system groping to find a replacement for oil. Give it time to work.”

“The “high” price of corn is not so high, really. A $4 bushel of corn is 56lbs (7 cents a pound).”

“I don’t know if ethanol is the ultimate answer to our energy dilemma, but it’s not a bad short term approach to bridge the gap until something greater is viable, like hydrogen, which none of us is likely to see happen.”

“Bottom line is food prices are not up significantly, no matter what lazy reporters would have us believe.”

“I am sick and tired of the media demonizing corn and the people who grow it….Corn to ethanol is a first step in using renewables to supply part of the world’s growing energy needs. As farmers, we take a balanced approach and provide corn for feed, exports, fuel and for new uses such as biodegradable plastics….As Dwight Eisenhower once said, “Farming looks mighty easy when your plow is a pencil and you’re a thousand miles from a cornfield.”

“Wouldn’t it be great for…the NYTimes to be celebrating our ability to quickly ramp up production of home-grown energy and the positive economic impact for rural America and our environment rather than advancing unfounded and poorly researched opinions?” (more…)

Great Response

This is the kind of response that every ethanol supporter out there should be writing.

It appears in “The Kansan.com” and was written by Dana Shifflett of Newton, who is apparently a wheat grower. I did not see the original editorial, but this writer makes excellent, well constructed points. Here are just a few – you need to read the whole thing and memorize it to fight back with some good facts.

Ethanol and the cost of food: Ethanol has increased the value of the crops we grow, but the cost of our crops is a very small portion — 4 percent to 6 percent, I believe, of the price you pay for food.

The majority of your money goes to the manufacturers and marketers. Rising energy costs mean higher transportation and manufacturing costs, and I believe that accounts for most of our recent food and consumer goods price hikes.

For perspective: In the summer of ‘99, I paid 68.9 cents for a gallon of gas at the Sam’s Club in west Wichita, and my wheat sold for $2.25 a bushel. Today, gas is roughly $2.80 — or four times as much — and the diesel that fuels our trucks, locomotives and barges is up a similar percentage. Wheat, at $6.55, is 2.9 times as much.

I don’t grow corn, but I think it’s up even less.

Fuel mileage: The writer claims E10 will cut your mileage by 7 percent to 8 percent. That is not my experience.

I keep logbooks for my vehicles, and I figure gas mileage and, since 1981, I’ve consistently found a 3 percent mileage improvement with E10 even though it has only 96.7 percent as much energy as straight gasoline.

I think I know why, but rather than make a long story longer, I’ll let those of you with a background in physics or mechanics consider the effect of ethanol’s higher latent heat of evaporation on an engine’s intake charge and compression stroke.

Read it all.

While you’re at it, check out this article from the New York Times and make sure to read all the comments. The article is very negative towards ethanol, but the comments are running about 50-50, although there is a massive amount of misinformation on both sides. This is the kind of article that ethanol supporters need to comment on.