Corn Commentary

Getting Started at the CUTC

CUTCThe 2008 Corn Utilization and Technology Conference is about to begin. The event is being held at the Marriott in downtown Kansas City and I just got in and connected in the media room.

In less than an hour we’ll kick things off with a Keynote Speech by USDA Under Secretary for Rural Development Tom Dorr. He’ll be introduced by NCGA First Vice President Bob Dickey. Afterward we’ll all head across the street for the opening reception. I’m going to be recording the opening session to post later this evening.

I’ll also be bringing you stories and interviews from the presentations starting tomorrow and over the next week or so.

UN Exec: Biofuels Part of Solution

From Reuters:

EU Urges Action on Climate Change

The head of the U.N.’s climate agency (UNFCCC) rejected the idea that carbon-cutting biofuels should be banned, after helping drive up food prices by using crops such as corn to make an ethanol alternative to gasoline.

“I think biofuels are a very important part of the solution,” de Boer said.

More Exports Than Ever

Despite all the hue and cry about food shortages, the United States is exporting more corn than ever before.

USDAAccording to the latest USDA forecast, U.S. agricultural exports are expected to reach a record $108.5 billion for fiscal year 2008. The new numbers represent a $7.5 billion increase from February’s previous record forecast and $26.5 billion above the final 2007 exports. Grains and animal products account for two-thirds of the export gains.

According to Agriculture Secretary Ed Schafer, “America’s increased export volume in bulk commodities like corn, other animal feeds and soybeans make agriculture the bright spot in the overall balance of trade. U.S. producers are on track to export a record 63 million tons of corn, and set new export volume and value records for pork. Export volumes and values are also up for many horticultural products with sales growth to Canada and the European Union being exceptionally strong.”

One of the biggest export market growth areas is China. U.S. exports to China are forecast to reach a record $10.5 billion, up almost $3.4 billion from 2007 levels.

China will be a topic at the Corn Utilization and Technology Conference this week. Scott Rozelle, a Helen Farnsworth Endowed Professor at Stanford University, will speak about “Corn in China in This Time of Global Uncertainty.”

Rozelle’s presentation will cover China’s trade policy, corn research and development, supply and demand, and more. “As incomes grow, as migrations happen, the demand for meat and other livestock product rises,” Rozelle said. “China just cannot produce the amount of feed it needs, so in the long term China is going to be a really good market.”

Point here is that U.S. corn growers continue to meet the demands of producing food for the world.

World Food Conference to Focus on Biotech and Biofuels

Agriculture Secretary Ed Schafer will present a three pronged strategy to deal with rising food prices, climate change and energy security when he travels to Rome next week for the conference on World Food Security being held by the Food and Agriculture Organization (FAO) of the United Nations.

Schafer says the strategy is basically to “provide food and other support to people who are hungry now, direct development assistance to those countries best able to rapidly increase the production of key food staples that can help feed the hungry, and encourage action to address multilateral and country-specific policies that prevent access to food and the technologies that produce food.”

Ed SchaferTo try and encourage greater use of biotechnology, Schafer and Director of U.S. Foreign Assistance Henrietta Fore will host a side event focused on new technologies to showcase developing countries that have moved forward with public investment in adoption of bioengineered products. “Bioengineered crops are one of many situations that need to take place for increasing yields around the country if we’re going to meet the demands of increased consumption,” Schafer says.

Biofuels will most definitely be on the plate at the World Food conference and Schafer is prepared to defend US ethanol production policy. “I would point out that in the United States and in other countries as well, all ethanol production specifically has come from increased yields in the corn crops,” Schafer said. “Our export markets are up in corn out of the United States. The yield increases are taking care of it, and certainly the benefits derived are much more than the 2 to 3 percent that is contributing to the rising inflation in food costs internationally. We think it’s an important initiative, and while people do have some concern I think we can point out the facts here, not the emotions but the facts, that this is not distorting the global price of food. And it’s an important direction we need to go.”

The conference will be held June 3-5.

Consumers Buying More FFVs

Yellow CapDespite the media feeding frenzy over ethanol, the demand for flex-fuel vehicles is up, at least in Mankato, Minn. The reason is higher gas prices, since E85 sells for about 70 cents a gallon less than regular unleaded.

A recent story on KEYC-TV interviewed Clements Auto Company in Mankato says more people have started buying E85s over the past few years. “Sales have gone up. People come in looking and asking does it burn E85?,” said Kurt Krumwiede with the dealership.

New Blogs on the Block

kernel.jpgTwo new blogs have debuted that make for an interesting contrast in the fuel-food debate that takes up so much of our time. Goodfuels.org is a new blog by the Renewable Fuels Association. Some of its writers also write here, on occasion. Their names and contact information are clearly displayed on the website.

Meanwhile, across the tracks, someone created a blog at “foodb4fuel.com,” a lousy address because it is hard to give out in radio interviews. You’d always have to spell out the “b-4.” And its authors are … get this: named “kernel” and four variations of “foodb4fuel.”

No conspiracy here, folks. No stealth campaign.

 Uh huh. We challenge them to reveal themselves.

 Update 6/4:

  • They have removed the contributors list shown on this post.
  • Foodb4fuel.com now has an “About Us” page … that fails to list the organizations involved.

Drilling Deeper into Oil Prices

cftc_logo.jpgThe recent attack on corn ethanol is based on the faulty assumption that, of all the factors affecting food prices, the only factor that can be changed by government is the impact on corn demand and prices by ethanol producers. the government can’t do anything about higher demand from world population growth, or about oil prices.

Well, that’s just plain wrong. We’ve long been of the opinion, shared by many, that higher energy prices have much more of an impact on retail food prices than grains such as corn. And a Wall Street Journal oped today argues that there is much Congress can do in this regard, such as allow more domestic drilling. In fact, its headline is “Blame Congress for High Oil Prices.”

But the real news today actually comes from the Commodity Futures Trading Commission, which has announced “multiple energy market initiatives.” Among these initiatives is a crude oil investigation. The CFTC states:

In December of 2007, the agency’s Division of Enforcement launched a nationwide crude oil investigation into practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts. Although the Commission ordinarily conducts enforcement investigations on a confidential basis, the Commission is taking the extraordinary step of disclosing this investigation because of today’s unprecedented market conditions. The specifics of the ongoing investigation remain confidential. All Commission enforcement inquiries are focused on ensuring that the markets are properly policed for manipulation and abusive practices.

The Associated Press has already picked up on this. 

We offer a humble blog hat tip to Randy Klein of the Nebraska Corn Board for this information!

American Thinking

Herbert Meyer, who served during the Reagan Administration as Special Assistant to the Director of Central Intelligence and Vice Chairman of the CIA’s National Intelligence Council, is a contributor to the American Thinker, “a daily internet publication devoted to the thoughtful exploration of issues of importance to Americans.”

American ThinkerRecently, he did a very thoughtful post entitled “The Bum Rap on Biofuels.” He noted that he had been staying out of the debate on that website, which was mostly negative towards biofuels, because he is “on the board of directors of Earth Biofuels, a Dallas-based producer of fuels including ethanol and biodiesel.”

Breaking his silence with full disclosure, he said he hoped that because he has a financial interest in biofuels that some readers would consider the possibility that he actually knows what he’s talking about.

One of the best points Meyer makes is that the US is producing more corn than ever before – enough to produce both food and fuel.

According to the US Department of Agriculture, in 1995 American farmers produced 192 million metric tons of corn. Of this, 14.7 million tons were used to make ethanol, from which 4.9 million tons of dried distillers grain were returned to the grain market. That left 182 million tons available for consumption and export.

In 2007, US corn production rose to 349 million metric tons. Of this, about 62 million tons were used to produce ethanol, of which 21 million tons of dried distillers grains were returned to the grain market. This left a whopping 308 million tons available for consumption and export — an increase of 110 million tons, or about 82 percent, over the 1995 figures.

He calls the main reason for global food shortages “the biggest, most under-reported story of our lives.”

Today, more human beings are emerging from poverty than at any time in history. If the present trend continues, within our lifetimes — or certainly within our children’s lifetimes — the majority of human beings will have emerged from poverty and joined the middle class.

That has led to more people improving their diets by buying more food and eating more meat – and this is a good thing!

And he of course points out the irrefutable connection between higher oil prices and higher prices for everything else, including and especially food.

Check it out – great read.

Top Ten Reasons Not to Use Ethanol

Top tenMark Lambert with the Illinois Corn Growers must be auditioning to be a writer for David Letterman – he came up with the following “Top Ten Reasons I Don’t Use Ethanol.”

10. Saudi Arabian riyals are much prettier than American dollars

9. Baby seals look good in a fresh coat of crude oil

8. Terrorists over seas will hate us even more when we stop sending them our money

7. The best sunsets are viewed from behind a curtain of smog

6. The oil execs won’t be able to afford their private islands on anything less than 8 digit salaries

5. I’m cold, bring on the global warming

4. I want my children to develop long lasting neurological problems from carbon monoxide emissions.

3. Alaskan beauty is overrated, bring on the drilling

2. Who needs ozone anyway, I need to get tan for summer vacation

1. I love the smell of carcinogens in the morning

Dumb as Turkeys

Domesticated turkeys are widely believed to be among the dumbest animals on earth, supposedly doing such things as standing in the rain with their mouths open till they drown or congregating on top of each other in one corner of a pen, suffocating the unfortunate ones at the bottom.

Turkey signThe intelligence of turkeys may be arguable, but it seems the poultry industry thinks we are even dumber than turkeys. During a conference call this week with other organizations calling for an end to federal incentives for ethanol production, Joel Brandenberg with the National Turkey Federation used this example for the impact higher corn prices is having on food prices. “You can find a high-end turkey breast cut that a year ago cost $5.50 a package now costing $7,” he stated.

That’s an increase of $1.50. According to production statistics, the cost of corn needed to create a pound of turkey has increased from 3.5 cents a pound to about 11 cents a pound in the past year.

Now, we don’t know the exact weight of that package of “high-end turkey breast” to which Brandenberg referred, but that makes it all the more insidious. It could be a five pound turkey breast or just a pound. He doesn’t give a price per pound, but let’s just for sake of argument say that it was a five pound package at $1.40 a pound – sounds reasonable given that the latest average retail price for whole frozen turkey was $1.17 per pound, according to the Bureau of Labor Statistics.

If it was five pounds, the price increase for corn to feed that turkey, based on a current price of $6 per bushel (which they are not even paying yet), would be less than 35 cents – not $1.50.

Chances are there must be other factors responsible for the increase in turkey prices, most likely energy, which would make up a much greater share of the increase. Now, granted, the price of a “high-end turkey cut” in Washington DC may be a lot higher than $1.40 a pound – which makes it not a very good example to use anyway for the “real impact on working families that are trying to make a food budget” as Brandenberg called it.

Point being – the food companies are highly exaggerating the impact of corn on food prices. And hopefully the American public will prove that they are smarter than turkeys and figure that out.



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