Corn Commentary

Understanding Inflation

NYT inflation chart

One of the benefits of the Internet is that traditional media can use it for projects that just don’t technologically fit with their format. Here’s a fascinating example from the New York Times, especially when we’re looking at this debate over food prices.

You can drill down into each piece of this pie chart, wherein you learn that fuel prices have increased much more dramatically between 2007 and 2008 than food prices. And the chart itself says … “The high price of oil is a factor that has made food prices rise quickly.”

Ethanol is Getting a Bum Rap

Kudos to Business Week reporter John Carey for daring to ask the question “Is Ethanol Getting a Bum Rap?”

Business Week Corn ImageAlong with this clever illustration, Carey makes the point that corn ethanol “isn’t quite the villain critics make it out to be,” especially with regard to food prices.

“Biofuels are a very, very small factor” in rising food costs, says David Morris, vice-president of the Institute for Local Self-Reliance, a nonprofit group that tries to strengthen communities politically and economically around the world. Absent corn ethanol, food prices would still be up dramatically because of soaring global demand, fast-rising prices for oil and natural gas used to make fertilizer, and climatic factors such as Australia’s drought. It’s also worth noting that these high crop prices save taxpayers billions of dollars in reduced subsidies to farmers—far more than is spent to subsidize ethanol.

Certainly, a rapid rise in food prices brings misery to poor countries. But over the long haul, “it’s not obvious that high grain prices are inherently bad,” asserts Nathanael Greene, senior policy analyst at the Natural Resources Defense Council. Years of cheap, subsidized grain in the U.S. and Europe have left farmers in the developing world unable to compete. They can’t invest in better seed, machinery, or cultivation practices (page 26). As a result, global average yields for corn, wheat, and rice are less than half what the world’s top 10% of farmers achieve. While American corn farmers produce 150 bushels per acre, farms in the developing world often get only 30. “If there is a crime against humanity, it is these low yields,” not biofuels, says Richard Hamilton, CEO of Ceres Inc., a Thousand Oaks (Calif.) startup developing biofuel crops. Those low yields will improve if farmers make more money. In the long term, “high prices will lead these countries to produce more of their own food,” says Morris, easing the supply shortages.

Lots more in this balanced article – read it yourself here – and add your voice to the comments, many of which continue to be anti-corn ethanol.

South Dakota Launches Blender Pump Program

SD Corn Utilization CouncilOn Thursday, the South Dakota Corn Utilization Council (SDCUC) and the Ethanol Promotion and Information Council (EPIC) launched a blender pump program aimed at helping gas station retailers in the state obtain funding and the equipment needed to sell blends of ethanol ranging from 20 to 40 percent to be used in flex fuel vehicles.

EPIC Fueling LogoEPIC Director of Operations Robert White said South Dakota is the perfect place to launch this new program. “South Dakota is where the blender pump movement started and we are happy to partner with the corn producers there to get this initiative off the ground,” said White.

SDCUC Executive Director Lisa Richardson says South Dakota’s ethanol industry is uniquely positioned to increase the use of higher ethanol blends to meet the Renewable Fuels Standard.

“The two largest ethanol companies are here, people in South Dakota are highly educated about ethanol and our goal is simply that we need to figure out we can use more product and we need to give consumers the choice and the blender pump does just that,” Richardson said.

There are currently about 20 blender pumps in the state and the goal is to install a minimum of 100 new blender pumps over the next year.

Read more here.

Little Bo Peep or the Ax Murderer?

Is ethanol Little Bo Peep or the Ax Murderer?

RFA Press Conference Rick TolmanThat’s the question National Corn Growers CEO Rick Tolman presented to the media during a press conference in Washington DC on Wednesday, pointing to the front page article on ethanol and corn prices in the Washington Post as being the latest example of making ethanol out to be the ax murderer. “There’s a lot of misinformation, slanted information that is just inaccurate,” Tolman said. “While we do have some role in higher food prices in the corn industry, we are certainly closer to Little Bo Peep than the ax murderer.”

Tolman pointed out the importance of the US corn industry, the dramatic increases in yields and production and the fact that prices for petroleum products have a much greater impact on food prices than corn does.

“What do corn prices have to do with food riots in China and Pakistan and India over rice?” Tolman asked. “Absolutely nothing. There is no connection to rice production around the world with biofuels production in the United States. Absolutely none.”

Tolman blamed the disinformation in the media on a very clever marketing campaign by those with deep pockets. “If you want to know who the real ax murderer is slashing our grocery food budget, look at $4 a gallon gasoline, look at $120 a barrel oil,” Tolman said.

Listen to Tolman’s comments here:

Press Turns Out for Food Price Briefing

RFA Food Price press conferenceThe media was very interested in hearing the story that agriculture and the ethanol industry had to tell about food prices during a press conference Wednesday at the National Press Club.

Former Agriculture Secretary John Block, National Corn Growers CEO Rick Tolman, National Farmers Union president Tom Buis and Renewable Fuels Association CEO Bob Dinneen gave opening statements about the facts on food price increases and entertained about 40 minutes of questions from reporters present and on the phone. They covered nearly every topic on the food and fuel waterfront and gave highly informative answers to probing and intelligent questions from the press. Hopefully this will translate into some balance in reporting about the food versus fuel issue.

Listen to the entire one hour plus press conference here:

You can see an online photo album from the press conference here: RFA Press Conference Photo Album

Food Price Press Conference – Updated

Updated with recorded video

Today at 1pm eastern time, agricultural and ethanol industry leaders are holding a press conference at the National Press Club. In attendance will be:

The Honorable John Block, former Secretary of Agriculture
Tom Buis, President, National Farmers Union (NFA)
Bob Dinneen, President of the Renewable Fuels Association (RFA)
Rick Tolman, CEO, National Corn Growers Association (NCGA)

The topic will be: “Farmers and Ethanol Industry to Present the Facts On Food Price Increases.”

We are working to try and stream the press conference live on UStream.tv using the player below. At the time of the conference, you should be able to click on the player and see the live stream. This is an experiment, so we will see how it works. Regardless, we are recording the conference and will have a full update available here afterward.


Update:
The live stream worked! Here is a recording of the first 20 minutes or so:

Don’t Throw Corn Ethanol Under the Bus

The development of alternative feedstocks for ethanol doesn’t mean that corn ethanol will be thrown under the bus, according to Agriculture Secretary Ed Schafer.

Ed SchaferSpeaking to farm broadcasters in Washington on Tuesday, Schafer talked about the importance of ethanol today. “We’ve passed Renewable Fuels Standards in this country that are important,” he said. “We cannot meet those demands with (only) corn-driven ethanol as a feed stock,” But, he says corn ethanol is a “stepping stone” to get to alternative feed stocks. “If we pull it back, we can do all the research in the world and come up with new ideas for alternative feed stocks and you won’t be able to do anything with them. So we need to make sure that we continue to develop the ethanol industry based on a corn feed stock.”

Does that mean we throw corn ethanol under the bus after the cellulosic ethanol comes on line?

“Absolutely not,” Schafer says. “What happens then is you have alternative feed stocks, the market place chooses the feed stock, the market place sets the price, that’s what made this country great.”

Listen to some of Schafer’s comments here:

What World Bank Report Says – and Doesn’t Say

The World Bank report released earlier this month has gotten quite a bit of media attention lately, especially regarding its concern about biofuels production.

During a press conference with President Bush Tuesday, a 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.”

Near as I can tell, the World Bank report does not say that. What it does say is, “Only a relatively small share of the increase in food production prices (around 15%) is due directly to higher energy and fertilizer costs.” It does not attribute a percentage to biofuels production.

Robert ZoellickWhat it does say is, “Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for biofuels production in the U.S., while existing stocks were depleted by an increase in global consumption for other uses.” What that means is that, as Agriculture Secretary Ed Schafer told farm broadcasters Tuesday, “Only about 25 percent of the corn crop goes into ethanol today and we have been able to stay ahead of that by yield increases.” In other words, our yield increases in the United States have offset the increased demand for corn to make ethanol.

It’s also critical to note that in the World Bank report graph showing expected world food price percentage increases for 2008 compared to 2004 – the biggest increases are in wheat (119%) and rice (101%) – not corn. Rice seems to be a major focus of the world food crisis, yet there appears to be no direct connection between the price of rice and biofuels production.

The World Bank does say that increased bio-fuel production has contributed to the rise in food prices. No one denies that. No doubt that increased corn prices have had an effect on increasing food prices. However, no one seems to know exactly how much. It is nearly impossible to sort out the impact of so many different factors coming to bear on food prices.

UN Food CrisisIn announcing a food crisis task force on Tuesday, United Nations Secretary-General Ban Ki-moon blamed the escalating prices on a range of factors — high oil prices, growing demand, bad trade policies, bad weather, panic buying and speculation, as well as, “the new craze of biofuels derived from food products.”

“In addition to increasing food prices, we see at the same time farmers in developing countries planting less, producing less, due to the escalating cost of fertilizer and energy,” he said. “We must make every effort to support those farmers so that in the coming year we do not see even more severe food shortages.”

That is key to the whole food crisis right there. Supporting farmers in other countries so they can produce their own food. President Bush noted in his press conference today that the US is “deeply concerned about people who don’t have food abroad” and will continue to be generous in food donations. He also suggested a “creative policy – is if we would buy food from local farmers as a way to help deal with scarcity, but also as a way to put in place an infrastructure so that nations can be self-sustaining and self-supporting.”

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.

Corn Growers at KC Indy

National Corn Growers Association Chairman Ken McCauleyThe recent criticism of ethanol doesn’t sit too well with the chairman of the National Corn Growers Association.

Ken McCauley of White Cloud, Kansas says the figures used in the article published in Sunday’s Kansas City Star, for example, were too vague. He says they didn’t properly represent real data and were spun in such a way to make ethanol a culprit… a culprit of rising food prices, rising gas prices and lower fuel economy.

Laura McNamara was at the Roadrunner Turbo Indy 300 Sunday and did an excellent interview with Ken that you can listen to here:

Ken is pictured here with Team Ethanol Driver Ryan Hunter-Reay, Ethanol Promotion and Information Council Executive Director Toni Nuernberg and EPIC Director of Operations Robert White.



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