Renewable Fuels Association (RFA) Vice President of Research and Analysis Geoff Cooper wrote about the “Ethanol Shuffle” last week on the RFA E-xchange Blog. Basically, we are shuffling sugarcane ethanol from Brazil to California to meet that state’s Low Carbon Fuels Standard (LCFS) – while at the same time, Brazil is importing lower priced corn ethanol from the United States to make up for not only the ethanol it is exporting to California, but the shortfall that country has experienced in ethanol production recently.

So, that’s how the “Ethanol Shuffle” works. California imports sugarcane ethanol from Brazil rather than corn ethanol from Nebraska or Kansas; and in turn, corn ethanol from the Midwest travels to Houston or Galveston via rail, then is shipped to Brazil via tanker to “backfill” the volumes they sent to the U.S. Picture the irony of a tanker full of U.S. corn ethanol bound for Brazil passing a tanker full of cane ethanol bound for Los Angeles or Miami along a Caribbean shipping route.

This is more than ironic, it’s just plain ignorant. First of all, sugarcane ethanol costs more than corn ethanol. According to Cooper, the ethanol California has been importing from Brazil has been an average of $1.56 per gallon MORE than corn ethanol from the Midwest. “As far as E10 goes, that’s about a 16 cent per gallon differential,” said Cooper.

The reason California prefers sugarcane ethanol over corn is because they claim it is better for the environment, a claim which can be disputed, depending on how the life cycle analysis is determined (see previous post). But, even if sugarcane ethanol actually does have a better carbon footprint than corn ethanol, that advantage is lost in the transportation shuffle. “If we were serving the California market with corn ethanol from Nebraska and the Brazilians were satisfying their own demands with their own fuel, the emissions related with moving that fuel are about half of what we’re seeing with this shuffling dynamic,” said Cooper.

Listen to an interview with Cooper about the Ethanol Shuffle here: Geoff Cooper on the Ethanol Shuffle

Among the topics of interest were farm policy, this year’s crop, the American Ethanol partnership with NASCAR, USFRA, exports and atrazine. I hit on just about all of those subjects during my interview with Garry. Here’s some of his comments:

Farm Bill – “Passing farm bills usually takes about 15 months, and ironically, this one – if it happens – will be one of the quickest ever in history.”

Corn Crop – “All the adversity we’ve had, and here we are with the 4th largest corn crop. I’m thoroughly amazed.”

USFRA - “We’ve been laying a lot of the ground work here to get the message out to defend agriculture. We have everybody working together on the same page for the first time, telling our story.”

Trade – “These three free trade agreements give us the impetus to move forward to improve our infrastructure – locks and dams on the Mississippi and Illinois Rivers.”

American Ethanol – “We have been going back over the advertising and we’re at 71% acceptance, that’s with 75 million fans throughout the United States.”

Atrazine – “It’s been a stalwart, it works, it’s inexpensive, it keeps the price of food affordable for the American public.”

Listen to my interview with Garry here: NCGA president Garry Niemeyer

Now it’s time to play catch up to gain market share lost due to the slowness in getting those agreements ratified. “Earlier this year, NCGA provided testimony to the Senate Finance Committee citing Panama as an example of lost market share,” says National Corn Growers Association president and Illinois farmer Garry Niemeyer. “Corn exports to the country peaked in 2008 and have since dropped 20 percent. This market erosion was due in part to a lack of progress on the Panama FTA. As a farmer, it has been frustrating to see other nations achieve access to markets over U.S. corn and corn products.”

Colombia has been importing more corn from Argentina, Brazil and Paraguay because of an import duty preference. From marketing year 2007-08 through 2009-10, U.S. corn exports to Colombia dropped 78 million bushels, an estimated loss of $475 million. Under the Colombian FTA, U.S. corn producers gain immediate access to the Colombian market for 2.1 million metric tons of corn at zero percent duty.

The new agreement with Panama eliminates 50 percent of tariffs immediately and is estimated to mean a $46 million gain in U.S. agriculture exports to that country. The Colombia agreement will bring a $370 million gain in agriculture exports and will eliminate 80 percent of tariffs, and the Korea agreement could mean a $1.9 billion gain for U.S. agriculture exports by eliminating two-thirds of tariffs immediately. Under the Korea FTA, imports of U.S. corn for feed and distillers grains are guaranteed to enter duty free immediately.

What this means in a word is jobs. “Farm exports help support more than 1 million American jobs, said Agricultural Secretary Tom Vilsack upon the signing of the FTAs. “These three agreements will increase farm exports by an additional $2.3 billion—supporting nearly 20,000 American jobs—by eliminating tariffs, removing barriers to trade and leveling the playing field for U.S. producers.”

American Farm Bureau estimates that the trade agreements will create more than 22,500 jobs when fully executed. Now that’s a real stimulus for the economy. Let’s get back in the game and play catch up.

According to the latest USDA supply-demand forecast, corn production for China this year was increase 4.0 million tons to a record 182.0 million tons. That figure is supported by 2011 weather data, information from crop tours, and early forecasts by officials in China. The U.S. Grains Council after its annual China Corn Harvest Tour earlier this month came up with a lower figure of 167 million metric tons (6.6 billion bushels), which is still a bumper crop. That was calculated on the basis of a projected corn harvest area of 30.9 million hectares (76.35 million acres), with a yield of about 85.9 bushels per acre – not impressive compared to the U.S., but pretty good for them.

“The 2011 corn crop I witnessed in China was far more impressive than I expected,” said Don Hutchens, Nebraska Corn Board executive director who participated in the USGC tour. “They have little, if any, crop loss and average yields are expected to be in the mid 80 bushel per acre range.”

However, all that corn is still expected to be insufficient to meet China’s demands. USGC expects China will need to import 5-10 million tons of corn for the 2011/12 season, a significantly more than USDA’s estimate of 2.68 million tons.

“With the fastest-growing middle class in the world, China has a great opportunity to enhance its food security through trade. That translates into a growing opportunity for U.S. producers over the next several years,” said Dr. Wendell Shauman, USGC chairman.

As recently as 2002/2003, China exported nearly 600 million bushels of corn. Exports then began to decline, and China was a net importer in 2009/2010 and 2010/2011.

Read more about the USGC China Tour and see photos here.

The U.S. Department of Agriculture estimates that passage of all three FTAs would result in 22,500 new jobs in that sector alone.  While this would not return unemployment levels to their pre-crisis lows, it would drastically, immediately change the lives of both the 22,500 hired as well as the approximately 67,500 people who depend upon them.  By opening these markets, Congress would directly improve the financial, physical and emotional well-being of 90,000 Americans.

Albeit in a less dramatic manner, the passage of these trade agreements benefits the entire nation.  The American Farm Bureau estimates passage of these agreements would generate an additional 2.5 billion dollars in the U.S. economy through agricultural trade alone. If Congress is willing to fight tooth and nail over cutting a few billion dollars from current spending, actually growing the national economy should be a high priority.

On hand is the President/CEO of the National Corn Growers Association, Rick Tolman. I asked Rick what he thought about the conference and its importance to the industry. Rick says it’s critically important and that the DDGS export market is one of the bright spots in the industry.

You can listen to the interview with Rick here:

“Deepening pain and unrest in Cuba are provoking bold actions that the U.S. government should note,” according to an editorial in the St. Louis Post Dispatch today. After decades of economic stagnation even Fidel Castro recently noted “the Cuban model doesn’t work anymore.”

What spurred Castro’s comment and the editorial is the dramatic change taking place 90 miles from our shore. After decades of economic erosion the worldwide recession is ravaging Cuba, an island nation of 11 million people who largely are dependent on imported food and many other products.

As the editorial points out the Cuban economy has been faltering since the since the Soviet Axis collapsed in 1991 and withdrew its economic support that had become so ingrained in Cuban politics and culture.  Cuba lacks a modern manufacturing infrastructure today but what they do seem to have is a growing awareness that they will need to seek foreign investment and outside sources of private capital if they are to bounce back.

The Post rightfully points out the ripe opportunity that presents itself to improve our relationships with one our nearest neighbors. After 58 years of nothing but acid-based rhetoric being the only commodity traversing the Carribean Sea, it is time to regroup and reconsider our relationship with Cuba.

Politics come in many shades and flavors but human nature is not so different. Many Cubans struggle to get enough to eat, so like new neighbors (or at least reformed one’s) let’s reach out with the hand of friendship.

It might produce some positive results, especially if that hand contains the aforementioned food they need. We have the opportunity and the means but do we have the will to do what is right?

Exports of the ethanol co-product distillers dried grains with solubles (DDGS) hit a new record in July of 886,300 metric tons – which is more than was exported in one year prior to 2005. Total exports this year so far are 4.95 million metric tons, getting close to the total last year of 5.65 million.

Geoff Cooper, VP of Research with the Renewable Fuels Association (RFA), says 2005 was really the first year that DDGS exports started to take off. “2005 was the first year that we exported more than one million metric tons and the growth has been very rapid since then,” Cooper said. This year, the U.S. ethanol industry is on pace to export 8.5 million metric tons of DDGS, or about 28% of expected total DDGS production.
China was the top destination for U.S. DDGS exports in July, accounting for nearly 40% of the total. Mexico, Turkey, and Canada were the second, third, and fourth-leading importers, respectively.

One third of the nation’s ethanol production ends up as DDGS, a high quality animal feed which can be used for everything from cattle to fish, and livestock producers in other countries have been quick to see the advantages of feeding the protein rich product to their animals. Cooper says the U.S. Grains Council (USGC), along with other companies and corn grower organizations, have been promoting those advantages to help exports grow. Expanding exports of DDGS will be the subject of a conference coming up October 6-8 at the Hyatt Regency McCormick Place Hotel in Chicago, Ill.

Listen to or download my interview with Geoff Cooper here:

In Missouri, the media representatives from Japan’s food and livestock industry as well as university professors and a consumer group leader first visited the family farm of Wayne and Scott Boschert in St. Charles.

“I felt a warm reception upon my arrival,” said Mr. Hirofumi Iwata, executive director of Animal Media Co. “I had an image of a farm run by a company and was surprised to find out it is run by a family, still interested in constantly progressing and not just maintaining the status quo in production, but in increasing their yield.”

The Japanese team was very interested in learning more about the history of the Boschert family farm, which stretches back six generations.

“The fact that Wayne Boschert is a fifth generation farmer and his son, Scott, is a sixth generation farmer is non-existent in Japan,” said Dr. Hideaki Karaki, professor emeritus for the University of Tokyo. “The fact that he doesn’t want to retire and is happy to be farming, along with the fact that the family didn’t have to sell off the farm, especially during the Great Depression, is incredible. To hear someone in Japan say, ‘I’m so happy I don’t want to retire’ is not conceivable.”

The group also visited the farm of John Boerding, where they got to ride in a combine and experience harvesting firsthand. After leaving St. Charles, the Japanese team went on to the Donald Danforth Plant Science Center in St. Louis, the Farm Progress Show in Boone, Iowa as well as an ethanol plant and several other seed producers and elevators along the way. Upon returning to Japan, team members are expected to report on the use of biotechnology and its attributes as well as the agricultural experiences they encountered while visiting the U.S. The visit was coordinated by the U.S. Grains Council.

Last week we heard that U.S. economic growth dropped to just 1.6 percent in the second quarter of this year, compared to 3.7 percent for the first three months, and some say it could be below one percent next quarter. Meanwhile, unemployment continues to flirt with double digits, riding at 9.5 percent overall.

But the agricultural sector is showing a significant increase in both farm income and exports. It’s all up about 23-24 percent compared to last year. Granted, last year was down 20 percent from the year before, which was a record for exports and near record for farm income. But, it definitely spells R-E-C-O-V-E-R-Y, unlike the rest of the economy, despite the best of efforts to make that happen.

“The great thing about this recovery is that it’s sector-wide,” said Agriculture Secretary Tom Vilsack in a press conference today about the new reports. “While an increase in the value of livestock production accounted for much of the upward movement, the value of dairy production rose by 26.2 percent; the value of meat animal production is up 14.6 percent, and the value of poultry and egg production rose 8.4 percent.” That’s all good news for corn farmers.

USDA increased its forecast for 2010 exports by $3 billion compared to May to $107.5 billion, due mostly to greater grain and feed shipments and higher values along with increased livestock, poultry, and dairy product exports. “Agriculture is one of the few major sectors of the economy today that has a trade surplus, which we are now forecasting to be a little over $30 billion,” said Vilsack. That is also forecast to get even better next year, up to $113 billion, very close to the record $115 in 2008, thanks to sharply higher unit values and volumes for wheat and corn, as well as increases in products like distillers’ dried grains (DDGS). Vilsack points out that every billion dollars in agricultural exports supports over 8,000 jobs and generates an additional $1.4 billion in economic activity.

Kind of makes you wonder where our economy would be right now without farmers and ranchers, doesn’t it? Vilsack noted the significance of the “underlying values of rural America and its farmers and ranchers to the resilience of the agriculture sector.” In other words, farmers and ranchers are not afraid of hard work, they have kept their debt below that of the rest of the economic sectors, and they continue to increase productivity through innovation and research.

It is really a very simple solution to economic problems. Hard work + low debt + increased productivity = economic recovery. The rest of the economy certainly could learn a lot from the farm.